Moe2Moto wroteDepends on the interest rate offered - the ones I see offer very little interest. Thus, if you want to be conservative, opt for a GIC - should pay slightly better than a savings account.This is all really great advice, my question is, do I put my money in a savings account for retirement, or what do y’all do to make the money you save, accumulate over time?
I’ve stayed away from stocks, because I’ve seen people lose A LOT of money in stocks. A lot of people my age invest, but I consider that a gamble.
I understand some of y’all’s employers had plans, such as, what you save is what they’ll match. Now that does sound great, but I’m not employed in those types of jobs yet.
Any advice on that?
Moe2Moto wroteInterest on savings accounts might as well be zero percent if you look at the rates that banks pay you to hold your money. If you're lucky, you may get 3% or so.This is all really great advice, my question is, do I put my money in a savings account for retirement, or what do y’all do to make the money you save, accumulate over time?
The usual rule of thumb for stock investing given by experts is to buy an index fund that tracks the S&P 500 like ticker SPY and hold it long. Don't try to chase the big score or play with meme stocks. Like a friend of mine who holds a seat on the stock exchange said, pigs get slaughtered. Showing the long hold graph, putting $44 into SPY in 1993 would be worth $677 today:I’ve stayed away from stocks, because I’ve seen people lose A LOT of money in stocks. A lot of people my age invest, but I consider that a gamble.
vreihen16 wroteI currently have no student loans, if I play my cards right, I’ll have little to no debt after I graduate.The usual rule of thumb for stock investing given by experts is to buy an index fund that tracks the S&P 500 like ticker SPY and hold it long. Don't try to chase the big score or play with meme stocks. Like a friend of mine who holds a seat on the stock exchange said, pigs get slaughtered. Showing the long hold graph, putting $44 into SPY in 1993 would be worth $677 today:
Avoid student loans, and max out any 401(k) or 403(b) retirement accounts that your future employers offer.....
RickFLM4 wroteStarted as a CPA. Got tired of the grind and looking for something more rewarding so now I run daycare centers in Minnesota.
Moe2Moto wroteI've made a lot of mistakes in my life, and this is one of the biggest. Thankfully, it was temporary and I fixed it in plenty of time.I’ve stayed away from stocks, because I’ve seen people lose A LOT of money in stocks. A lot of people my age invest, but I consider that a gamble.
Moe2Moto wroteActually, at your young age and diversified investing in stocks, via ETF and stop-losses is THE way to invest for your retirement. Take a course or two.lll
I’ve stayed away from stocks, because I’ve seen people lose A LOT of money in stocks. A lot of people my age invest, but I consider that a gamble.
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Moe2Moto wroteSaving accounts are terrible vehicles for retirement savings. People telling you to stay away from stocks and the market clearly have no idea what investing is and are likely folks that will never be able to retire or were born rich. Don't listen to them, IMO.This is all really great advice, my question is, do I put my money in a savings account for retirement, or what do y’all do to make the money you save, accumulate over time?
I’ve stayed away from stocks, because I’ve seen people lose A LOT of money in stocks. A lot of people my age invest, but I consider that a gamble.
I understand some of y’all’s employers had plans, such as, what you save is what they’ll match. Now that does sound great, but I’m not employed in those types of jobs yet.
Any advice on that?
ezaircon4jc wroteAdvice for someone wanting to live a good life.How'd we get from what one does for a living to retirement strategies?
ezaircon4jc wroteThe only good one, Buy Low - Sell HighHow'd we get from what one does for a living to retirement strategies?
:)
Vindicator3 wroteYes, Roth. As you stated, I had quickly advanced in my yearly salary where I couldn't contribute to a Roth account I had opened. I made the mistake of focusing on maxing out the allowable yearly contributions to my 401k without considering all the advantages of what money invested in a Roth brings.I would not neglect international stocks. The Vanguard "total market" ETFs are cheap and good and very diversified.
You could do a lot worse at your age than investing your retirement savings in, say, 60% VTI, 30% VXUS, and 10% BND. That's 60% in the broad US stock market, 30% in the broad non-US stock markets, and 10% in the broad US bond market.
Adjust your bond percentage lower for higher volatility and higher returns over time, adjust it lower for the opposite. At your age, the lower the better and even zero has a great case, but the real key is to put it where you won't be tempted to panic in a stock downturn. If you need a 40% bond allocation to feel comfortable riding out the ups and downs, do it. It's higher than I would do, but it's a lot better than going 90% stocks and then panic selling at the bottom of a downturn. You have to know your own psychology. In that vein it can help to avoid financial news.
Another thing to consider is Roth opportunities. If you become a dentist, it won't be long before you make too much money to contribute to a Roth, so try to make your max allowable contribution to a Roth account (invested per the above) now and every year until you start making the real money. I know you're in school, but if you can scrape together a few k each year to do that ($7,500 is the max per year), you'll be glad you did. Unfortunately, the max is "use it or lose it" every year - you can't skip four years while you're in school and then contribute 30k when you get out and get a job.
zx10guy wroteGood points.Yes, Roth. As you stated, I had quickly advanced in my yearly salary where I couldn't contribute to a Roth account I had opened. I made the mistake of focusing on maxing out the allowable yearly contributions to my 401k without considering all the advantages of what money invested in a Roth brings.
I'm currently correcting that problem as my current employer has a Roth 401k. So I'm not under the income limitations anymore. I'm playing a bit of catch up now to get the Roth component in my investments up.
Also, I've been contributing to a standard brokerage account. I started that back in 2014. But the divorce devastated what I had put in...(ex wife put in zero). So I've been rebuilding that account since the divorce.
The ideal situation is for you to have three different buckets of money to draw from at retirement to work around the tax codes to your advantage. With my 401k, I was leveraging the fact I can save on taxes now since I'm in a pretty high tax bracket. But money in IRAs (from rollovers) and my 401k are going to be taxed as ordinary income when I draw from them. Also they're subject to required minimum distributions. With a Roth, you're using after tax dollars but when you pull the money out at retirment, it's all tax free and are not subject to required minimum distributions. And my brokerage account, I can pull money out at any time. But the gains in the account are only taxed at the lower capital gains rate.
Having all three account types allows you to plan distributions where you ensure you're in a certain lower tax bracket at retirement.
dcstep wroteI agree that one should do this analysis. I'm not sure I agree with "even in the lowest tax brackets," but do the analysis, comparing current tax rate to expected tax rate in retirement. The best use case for Roth IMO is the OP's exact use case - he'd in college now with several years of college and dental school to go, during which he's presumably in a very low tax bracket, but then he will be a practicing dentist and in a much higher one. For him, maxing Roth now (to the extent he can scrape the money together) is a no-brainer, then switch to traditional 401k while he's practicing. The best use case for traditional IRA/401k and avoiding Roth is someone at or near their earnings peak who expects to be in a lower tax bracket at retirement (due to lower taxable earnings, moving to a lower-tax jurisdiction, or whatever reason). Of course, predicting what Congress and your state will do with tax rates and brackets in the future is difficult to do with precision.Even in the lowest tax brackets, Roth is sketchy when you consider the NEGATIVE first year investment income that goes out as taxes. Do a discounted cash flow analysis and Roth often blows up vs. a traditional retirement account.
dcstep wroteThis is a good reason to consider putting your retirement savings in taxable accounts rather than 401 or IRA as you get closer to retirement (depending on your tax bracket then vs expected tax bracket in retirement), but IMO the OP is way too young to avoid 401 or IRA in order to avoid having withdrawals taxed as OI. For anyone not in the last 10 years before retirement, it's hard for me to think that giving up the tax deferral will be a net advantage just because of the OI vs capital gains issue during retirement.Another thing to consider is that 401(k)s and IRAs turn Capital Gains into Ordinary Income.
Vindicator3 wroteExactly, I concur. This why I addressed my post to "readers."... The best use case for Roth IMO is the OP's exact use case - he'd in college now with several years of college and dental school to go, during which he's presumably in a very low tax bracket, but then he will be a practicing dentist and in a much higher one. For him, maxing Roth now (to the extent he can scrape the money together) is a no-brainer, then switch to traditional 401k while he's practicing. ...
