How much should I be putting away?

[CoolRunnings]

Lots of sound advice not much to add, but if you choose mutual funds/etfs please make sure you are paying attention to expense ratios/loads/fees etc. You should never be buying into a loaded fund. Your 401k may limit the funds you are allowed to invest in, so after you have determined your risk tolerance, time horizon, etc, build a portfolio you are comfortable with using funds with the lowest expense ratios available.

 

[TallFlyer]

Mathematically I definitely agree with maxing out the match on your 401(K)s then looking at a Roth IRA. Just starting down that road myself now, and I envy your ten year head start on me.

Also realize that it's more than you contributing to the whole picture now. We haven't spoken in quite some time so I don't know the specifics of your situation, but even if your wife isn't working she's a valuable asset to your overall economic picture. A professional Home Economist, if you will. I've seen people save loads off of super couponing, as one example.....

Learn from those who have come before you, especially their mistakes. People have mentioned Dave Ramsey, and I've been on record on this board as saying he's a good guy to get in your head. I would absolutely highlight his podcast as a way to quickly learn of what things NOT to do, as well as get a handle on his philosophy of life. Doing his series "Financial Peace University" will put you leagues ahead of your peers in financial knowledge.

As far as real estate, I've always thought that an owner occupied fourplex would be a great first home purchase, and a year or two beyond that purchase moving into a home that the profits off a fully occupied fourplex could more or less cover.

Lastly, start NOW on making some investments in your health. Not saying your out of shape, but your thirties will feel a lot different from your twenties if you let them. I recommend the book "Wheat Belly" as a good starting place.

 

[Pilotforhire587]

Assuming you have a few grand in savings now to cover daily issues that pop up (you'd be amazed how many people do not)... then,

1. make sure you have life insurance to take care of your family in case you dont come home tomorrow or 10 years from now - enough to pay off house, send your wife to school if needed, help your kids with school, and provide a nice buffer fund to help them with other issues that will come up in normal life
2. pay down any consumer debt
3. build up a 6 month cash reserve, keep this pretty liquid, at least a couple months worth in a money market you can write a check from tomorrow if needed, the rest in a low risk fund if you want
4. max out any employer matched options like matched 401k, it's free money, dont leave it on the table
5. save as much as you can and find long term investment that fits your personality - this is where you can get personalized but unless you really have an interest in learning about markets and being very hands on (which most people will underperform if they chose to do and are being honest about it), you can find some solid index funds as a no-brainer way to start and read up on other funds if you like... find a reputable planner/mentor, despite what many do-it-yourself gurus proclaim, a good planner can help you from making stupid decisions, but get someone trusted by other people who are doing well financially dont just pick someone off the internet or phone book

* Alternatively, skip #5 until your house is paid off by just shoving every spare dollar at your mortgage. If you want to be a bit more hands on and are not attracted to playing markets, I'd also encourage you to look at long term real estate investing (not the flipping crap like you see on TV), as even seemingly unexciting options can really add up over time and you're developing not only equitable worth but also a steady source of passive income.

This^^^ You are young and probably don't have a huge cash flow. Do this first. When you start making 100k+ a year then you should start looking at alternative and additional investments whether that be playing with the market or investing in properties.

 

[KSCessnaDriver]

What kind of vesting period is there on the 401(k)'s offered in the 121 world, out of curiosity?

 

[dustoff17]

I absolutely agree with the 401 investment up to their funds matching amount and make sure you maximize your IRA every year. Pay extra on each of your high interest cards/loans and minimum on the others. Always, always tuck away some into savings as a backup plan AND don't skimp on your life insurance...make sure your family can make it without you.

Oh, and, if you want to start something for your kid, don't invest in a 529!

 

[jtrain609]

I absolutely agree with the 401 investment up to their funds matching amount and make sure you maximize your IRA every year. Pay extra on each of your high interest cards/loans and minimum on the others. Always, always tuck away some into savings as a backup plan AND don't skimp on your life insurance...make sure your family can make it without you.

Oh, and, if you want to start something for your kid, don't invest in a 529!

Why not?

 

[Ian_J]

Why not?

My guess is the 10% penalty if your kids decide to be an HVAC tech combined with the inability to manage it yourself and it's general inflexibility. Investment options are limited and you can only change funds once every 12 months.

 

[jtrain609]

My guess is the 10% penalty if your kids decide to be an HVAC tech combined with the inability to manage it yourself and it's general inflexibility. Investment options are limited and you can only change funds once every 12 months.

Yeah but...

1. Do you REALLY think the average idiot (me) could manage the funds any better? Most people pay a pilot to fly an airplane because they don't know how to do it themselves.

2. How about the (slight) tax advantages if you open in a 529 in the state you reside in?

3. You can use a 529 plan for any post high school graduation education (http://www.savingforcollege.com/articles/20100409-7-myths-and-realities-of-529-plans).

 

[Ian_J]

Yeah but...

1. Do you REALLY think the average idiot (me) could manage the funds any better? Most people pay a pilot to fly an airplane because they don't know how to do it themselves.

2. How about the (slight) tax advantages if you open in a 529 in the state you reside in?

3. You can use a 529 plan for any post high school graduation education (http://www.savingforcollege.com/articles/20100409-7-myths-and-realities-of-529-plans).

Sorry - my knowledge of 529s was exhausted with my post above. I was just throwing guesses as to what dustoff might have meant.

Edit: And John, you're an exceptional idiot, not an average one. Give yourself some credit.

 

[drunkenbeagle]

Yeah but...

1. Do you REALLY think the average idiot (me) could manage the funds any better? Most people pay a pilot to fly an airplane because they don't know how to do it themselves.

A below average idiot can outperform a fund manager pretty easily. They take 2% of the top every year for their fees, so they already start with a huge handicap. Most don't beat the S&P 500 anyway. If you invest in nothing other than S&P 500 index funds, you will beat most professionals over time.

Of course, no one other than you makes money doing that, so you will never hear anyone suggest that.

 

[jtrain609]

A below average idiot can outperform a fund manager pretty easily. They take 2% of the top every year for their fees, so they already start with a huge handicap. Most don't beat the S&P 500 anyway. If you invest in nothing other than S&P 500 index funds, you will beat most professionals over time.

Of course, no one other than you makes money doing that, so you will never hear anyone suggest that.

Utah's 529 plan is an annual fee of 0.15% to 0.2%, depending on investment options.

Even in looking at their conservative options for funda performance, they've been returning 8%.

http://www.uesp.org/pdfs/Program_Description.aspx

Could I do better? Maybe, maybe not. Even if I do, will I be able to beat the averages that their fund managers are producing AND any taxes I have to pay? I doubt it.

 

[drunkenbeagle]

Utah's 529 plan is an annual fee of 0.15% to 0.2%, depending on investment options.

Even in looking at their conservative options for funda performance, they've been returning 8%.

http://www.uesp.org/pdfs/Program_Description.aspx

Could I do better? Maybe, maybe not. Even if I do, will I be able to beat the averages that their fund managers are producing AND any taxes I have to pay? I doubt it.

Those funds are all indexes, exactly what I would buy too. They aren't actively managed, so almost no management fees. Their fund managers are making zero decisions, they will mirror the averages.

The tax break is nice too.

 

[Ian_J]

Utah's 529 plan is an annual fee of 0.15% to 0.2%, depending on investment options.

Even in looking at their conservative options for funda performance, they've been returning 8%.

http://www.uesp.org/pdfs/Program_Description.aspx

Could I do better? Maybe, maybe not. Even if I do, will I be able to beat the averages that their fund managers are producing AND any taxes I have to pay? I doubt it.

Yeah, I'd do that if I had a kid.

 

[pnwchief22]

A quick note on state sponsored 529 plans for a child or in my case children....my wife and I funded one for each child when the state program began in 1996....I used those funded contracts to pay college expenses when each child enrolled in college and the best part was the increase in value is directly proportional to the increase in tuition at the highest priced public university run by the state...not every 529 pays off that good, do your homework. Return was 250+ & bypassed all the market crashes during the recession. (Now the state is trying to make the program to be a little less generous).

 

[dustoff17]

jtrain609, as you can see there are a huge variety of opinions on this (and many others) subject.
I'm not a financial advisor but….

The issue that makes me want to stay away from 529s is that you must put the fund in the name of a specific child. And, not withstanding the 20% return mentioned above, the overall returns have not been stellar (although this might be a sign of the market itself). As mentioned above the funds can be used at most all higher learning facilities so that's a non-issue with me.

The funds in the name of a specific child cause issues later on in life when they begin to use the funds. My Dad showed me an article from an AARP magazine. The article made a case study of several students as they tried to use their 529s. These students were part of the first group of "benefactors" of full-maturity 529s. They were from all walks of life and enrolling in numerous schools nationwide. The issue was discovered (or might have been predicted by our Gub'ment when they approved 529s in the first place) as the kids applied for loans and grant.

Because the 529 is in their specific name and SSN, they count as a "personal accountable asset" with regards to student loans (both qualification and interest rates) and also with regards to qualifying for Grants (i.e. Pell, etc). Almost ALL of the students with a lot of accrued money in their 529s were denied grants. Many were denied loans and those that did receive loans were tied into higher interest rates than those students that didn't have 529 funds.

What AARP recommends is for the grandparents (or parents)to avoid the 529 as far as an investment for education. They recommend other qualifying Mutual Fund investments held in the name of the grandparent or parent until such time as the student is ready for school. Make all appropriate applications NOT considering the funds in holding (as they are "officially" not assets of the student, this is perfectly legal). What you may gain in 529 proceeds and tax benefits will not compensate for the inability to get a grant or loan in the future.

I started three separate Mutual Funds for my kids and have contributed faithfully to each of them. Also, although I don't particularly care for single stock investments, I bought into three different stocks (also for the kids). I dumped $700 (all I could afford at the time) into these stocks and we decided to "let it ride". The highest earner was at $4,300 before the market tank, now at $3,100.
Of course your mileage may vary but I haven't been able to find the long-range benefit of the 529 when you consider not just what it gives, but what it takes away from the student when they get to school time.

Please remember: this is my two cents worth AND I'm only getting a penny for my thoughts. I'm losing money just opening my mouth!

 

[jtrain609]

Pell grants are need based, why should a student with a bunch of money in the bank for school be given a Pell grant when they obviously have the money to go to school? Same thing with student loans, why should somebody without the need be given the most advantageous interest rate?

 

[dustoff17]

That's my point exactly!
Unless you have a bunch of money to send your kid to school (in which case you don't need to worry about loans or grants), why do anything that would sway the pendulum away from your favor?

I don't have the funds to just write a check and send my kids off to school. That being stated, I'm going to invest in an area that will afford them the best opportunity for the maximum amount of money. For me, the 529 goes against every opportunity my kids may have to get funding for school. I'll still invest the same amount of money at the same tax benefit as a 529 but it won't count against my kid when the time comes.

 

[Hacker15e]

the 529 goes against every opportunity my kids may have to get funding for school.

Will they not be able to "get funding for school" the same way I did it -- have a job and save?

 

[jtrain609]

Will they not be able to "get funding for school" the same way I did it -- have a job and save?

Different era, holmes. Unless you went to the academy, check your alma mater's tuition rates there days, then reference it against the rate of inflation of the minimum wage and you'll realize very quickly you can't work our way through school anymore.

Heck, I'm not even sure oyu could when I graduated in 2005.

 

[jtrain609]

That's my point exactly!
Unless you have a bunch of money to send your kid to school (in which case you don't need to worry about loans or grants), why do anything that would sway the pendulum away from your favor?

I don't have the funds to just write a check and send my kids off to school. That being stated, I'm going to invest in an area that will afford them the best opportunity for the maximum amount of money. For me, the 529 goes against every opportunity my kids may have to get funding for school. I'll still invest the same amount of money at the same tax benefit as a 529 but it won't count against my kid when the time comes.

I don't have the funds to simply "write a check" for my kid's school, hence why I'll save in a 529 plan for the next 18 years.

You know, the old fashioned way.