What can I do to grow my Savings

[jbmb11]

Hi All,

I'm new here and would like some advice. I'm hoping you all can help. I have saved about 20k as an emergency fund/savings. I add to this fund monthly 1k. Should I take some of this out and try investing it into something? or leave it and continue to add 1k a month at less than 1% interest?

Thanks in advance.

[bUU]

Standard advice is to pay off non-secured debt (except very low interest debt, such as certain student loans), and then build up money in your emergency fund sufficient to cover 3-6 months of expenses, and then invest the rest, starting by taking advantage of any company match you get for 401k plan offered, and more generally allocating investments across a diverse set of asset classes - but again, that's after you have all your non-secured debt paid off and after you have put away enough money to cover 3-6 months of expenses, preferably FDIC-insured.

[jbmb11]

The only debt I have at this time is a new car loan. I am paying in more to that and will have it paid off in 3 years. Interest is 2.29% I have no credit card debt. I just started my company's 401(k) program that they match at 3%. So would it be advisable to open a trading account with say TD Ameritrade and start investing with some of my EF?

Quick Note: I spoke with a financial advisor, however I came away from that thinking I didn't have enough or make enough to work with him. I think he was saying something in the range of 50k to 100k to be worth it.

[bUU]

I just started my company's 401(k) program that they match at 3%.

So for sure put 3% in there at a minimum. However, keep in mind that in order to afford retirement, you'd either have to save 20%-30% for retirement every year, or you may end up getting to the point where you'd have to save 50% or more late in life to be able to afford retirement.

So would it be advisable to open a trading account with say TD Ameritrade and start investing with some of my EF?

Some of this will come down to whether you're eligible to contribute to a Roth IRA. If so, there are some compelling reasons to max that out each year. It gives you a lot of flexibility and some headroom for when you start retirement. However, it means that you're going to have 15%-28% less money to invest each year (in that account, as compared to in a traditional IRA), and therefore you miss out on the gains from that 15%-28% and compounding on top of those gains. There are loads of webpages where you can find arguments supporting either approach - there is no definitely answer: You'll just have to read the competing arguments and make your own decision and live with it.

Personally, I'd suggest you stick with either Fidelity or Schwab, unless you already have some other relationship with Ameritrade. I closed my Ameritrade account last year. Their service quality was mediocre, and Fidelity is stellar. Some folks will recommend Vanguard, but Fidelity offers what Vanguard offers almost as cheaply as Vanguard, and also offers so much more that Vanguard doesn't offer. You may also want to choose between Fidelity and Schwab based on whether either has an office local to you.

Regardless, I personally have put most of my retirement savings into 401ks. I'll pay loads of tax when I start taking distributions, but I'm hoping that compound gains on gains will more than make up for that. What I have in taxable brokerage accounts is just savings that for whatever reason I couldn't put into 401ks (in recent years, because I've maxed out my tax-deferred contributions).

Quick Note: I spoke with a financial advisor, however I came away from that thinking I didn't have enough or make enough to work with him. I think he was saying something in the range of 50k to 100k to be worth it.

Then I wouldn't even consider working with him when I get to 50k to 100k. I have never seen any compelling proof that giving some adviser a percentage of what I've earned from working for my employer actually results in me having more investment gains in the end. I could understand if an adviser wanted a cut of the gains that the adviser's advice earns for me on my investments, but the reality is that margins are so thin in finance and gains so unpredictable that no adviser is ever willing to make that deal - to put their money where their mouth is and effectively assure that you're going to better off with their advice rather than on your own, by taking their compensation only out of how much "better" you do.

Ideally, you should learn the basics yourself and make all your own investing decisions. Barring that, consider one of several available auto-pilot investment strategies: Invest in target date funds, or lifestyle funds like the Wellesley and Wellington funds from Vanguard. Barring that, stick with financial advisers who charge you a flat, set fee, having nothing to do with how much money you already have or will invest, and only work with advisers who will sign a fiduciary statement (like THIS one) assuring you that they're not making commissions based on what they advise you to buy or sell.

[jbmb11]

Thank you all for the advice. I will look into Fidelity, they have an office near me.

[humandraydel]

I just started my company's 401(k) program that they match at 3%. So would it be advisable to open a trading account with say TD Ameritrade and start investing with some of my EF?

Quick Note: I spoke with a financial advisor, however I came away from that thinking I didn't have enough or make enough to work with him. I think he was saying something in the range of 50k to 100k to be worth it.

1. How much are you contributing to the 401k? It is probably better to invest some (most?) of the $1k per month into your 401k.

2. The advisor makes a % of your investment, so of course it's not worth it TO HIM for you to invest unless you have $100k. You don't need an advisor, they are rarely worth the cost and you can do better yourself.

[feh]

So would it be advisable to open a trading account with say TD Ameritrade and start investing with some of my EF?

Anything that is invested is not part of your EF. They should be thought of as distinct buckets.

[jbmb11]

humandraydel,

I am contributing 3% and my employer matches 3%. The reason for me going to an advisor was to get my finances in order. I was hoping he would be able to help guide me in the right direction on saving for retirement, What to claim on my W2, Estate planning, etc... I've been fortunate enough to be able to save some money over time but unfortunately growing that money at a more efficient rate has not been as fortuitous.

[snafu]

As bUU has explained, you will do best by categorizing or layering your savings. The 1st and basic 'foundation' starts with your Emergency Fund whose purpose is to cover at least 3 months of your living expenses if you became unemployed or unable to work. The sum set aside in an easy to access form is dependent on the stability of your particular employment. 2nd layer is Retirement Plan. It's imperative to capture any retirement sum offered by your employer.

The whole concept of retirement planning is based on having sums compound year over year over your entire working years. You need to know what your retirement sums are invested in and how much you're paying in fees/expenses/costs [they have so many different terms for taking money out of your pocket] A sub layer of Retirement is Roth IRA following income limits. I suggest balancing the two like low cost Dividend Mutual Fund [MF} in one and Index Fund in the other until you learn more and include an International Fund. As the sums and years move forward, you can change out to your comfort zone.

3rd finally your desire to 'Invest'. Any sums to be 'investment' need to remain in the investment 'category' for at least 5 years. It's not the same as saving for a downpayment, a wedding, expensive trip etc. You can take out profit, just leave the capital for 5 yrs., change specific product etc. Most of us started with MF or ETF and didn't buy specific stocks until we felt knowledgeable.

[autoxer]

If you are comfortable with the amount you have in your emergency fund, have you considered increasing your 401k contribution by the $1k / month? You might as well take advantage of the tax benefits if you are investing for the long term.

[jbmb11]

Snafu,

Thanks for the advice. Retirement funds is holding about 6 months coverage for Living Expense. 401(k) was just started and I don't plan on touching that till I'm retired. I will up my percentage to 6% from 3% at my next opening to do so. Investing is something I'm interested and will look into more.

autoxer,

Thank you for your response. Emergency fund is ok, but not great. My whole life's saving is mostly tied up in that account. I'm not sure if I feel comfortable adding that extra amount at this time to the 401(k). Though long term investing for retirement is my priority, I'm leery about my current job. Once I have a few more years here(if possible) I might feel more comfortable putting into the 401(k) account. I know I can move it if I lose my job, but maybe I need to study how 401(k)'s actually work

[bUU]

Retirement funds is holding about 6 months coverage for Living Expense.

I'm sorry I'm not familiar with this term... is that a form of long-term care insurance?

I know I can move it if I lose my job, but maybe I need to study how 401(k)'s actually work

401ks are subject to federal regulation (ERISA) and so when you put money in, it's yours, if that's what you're worried about.

[autoxer]

I will up my percentage to 6% from 3% at my next opening to do so. Investing is something I'm interested and will look into more.

You don't have to wait for them to bring it up. You can likely contact HR anytime to adjust how your paycheck is allocated. There's no time like the present.

Thank you for your response. Emergency fund is ok, but not great. My whole life's saving is mostly tied up in that account. I'm not sure if I feel comfortable adding that extra amount at this time to the 401(k). Though long term investing for retirement is my priority, I'm leery about my current job. Once I have a few more years here(if possible) I might feel more comfortable putting into the 401(k) account. I know I can move it if I lose my job, but maybe I need to study how 401(k)'s actually work

As bUU said, the money is yours, even after you leave the company. When you leave a company, they will give you some options, like rolling it into an IRA, cash it out, or leave it where it is. I've been meaning to roll over an old 401k, but I like how it is currently invested at Fidelity, so it isn't a priority. If the 401k plan doesn't have good options, then you should roll it over right away.

[jbmb11]

buu,

I meant to write Emergency Fund not Retirement Fund...sorry about that, as for the 401(k) I was more worried about how to transfer it without issues. Also the money my employer matches is not vested till after 5 years.

autoxer,

HR only allows changes to our 401(k) on a quarterly basis(every 3 months). No changes until then, according to them.

Question: Are you saying if I do not like the current options or 401(k) provider, that I could move it to another 401(k) plan provided by say Fidelity? or am I locked with the company's 401(k) provider until I quit or lose my job?

[autoxer]

autoxer,

HR only allows changes to our 401(k) on a quarterly basis(every 3 months). No changes until then, according to them.

Question: Are you saying if I do not like the current options or 401(k) provider, that I could move it to another 401(k) plan provided by say Fidelity? or am I locked with the company's 401(k) provider until I quit or lose my job?

The company chooses the 401k provider and which funds are offered, so you are stuck with them until you leave that employer. Tell them they should switch it to Fidelity or Vanguard, you never know they just might listen.