$30K in savings no 401K. Need some opinions

[cologero]

Yes, I was a bit nervous about taking down my cash balances that low...especially beacuse of what dojo said (God forbid I lost my job). I talked to some collegues today and did some research online re: Roth IRA's...so I feel a little better that I'm taking the beginning steps in educating myself. And the more I think about it, even though my car and student loan interest rates are very low, why wouldn't I want to just pay them off and then contribute that amount to a 401K where at least my payments/contributions are earning interest?!

Aside from starting a Roth IRA by the end of the year, perhaps I should be agressive with my 401K contributions but not max them out completely "the first year" (max would be a 25% contribution). This would buy me some time to get a feel for everything, educate myself more and give me some peace of mind that I'm not being too frugile. Something like:

1. Debts and Savings:
- Pay off car loan $11,000
- Pay off student loan $5,000
- Contribute $5,500 to Roth IRA in 2013. I'm thinking Vanguard or Fidelity.
- Contribute 15-20% to my 401K beginning in January. Including my employer match, this will be about $1,000 per month.

Doing those things will leave me a $9K EF cushion in my savings (about 8 months worth of bills). Contributing to the 401K (at a min of 15%) would also reduce my take-home pay to about $2,900 per month (from $3,400).

2. Set a budget...I'm thinking each month:
$1,150 - bills
$300 - food & staple items
$200 - gas
$300 misc. "fun things" like eating out, dating (ha!), saving for a vacation, etc
$450 towards 2014 IRA
$500 towards down payment on a future home
TOTAL: $2,900

Thoughts? Is 15-20% too little of a 401K contribution on a temporary basis? Am I on the right track at least?

[cypher1]

Thoughts? Is 15-20% too little of a 401K contribution on a temporary basis? Am I on the right track at least?

While I'm not as knowledgeable as others on here for investing, I would probably recommend just starting with a contribution of 10% to 401K and max out your Roth IRA,then work off your budget from there. That's what I'm currently doing and I'm only a few years younger.

The same goes with keeping a slightly larger EF than just 6 months. Jobloss and health are always a concern, but your monthly expenses aren't much, plus you don't have a mortgage yet. Others could agree you could be doing more with that money, but there's something to say about peace of mind to be safe.

That also goes to account for your risk tolerance of where your money lies for various investments. How aggressive or conservative you are is up to you. The good thing about your age is you're still young with plenty of time to recover, catch up, for investing in the markets.

[snafu]

hi: Could you post details of employer's contribution to employees retirement, what investment products are available and most important the fees and commission [whatever word they use] . You want to capture free money [employer's contribution].

Don't get mired in budget details, get categories listed and assign sums based on experience. I suggest aiming for 50% to spend on 'needs', 30% for 'wants' and 20% for savings instruments whether retirement or other. Perhaps start by setting aside an easily accessible no cost/low cost 'Emergency Fund' which is at minimum 3 months of bare bones, basic, survival expenses like rent, utilities, food, SL , life insurance, transportation etc. in the event of job loss. [You could sell car and buy beater, cancel cable, sell 'toys' etc. if necessary]. I'm presuming you already know that meals are 1/2 - 2/3 less expensive if you cook and eat at home.

You will need to access your Risk tolerance. The issue just now is that interest paid in a savings a/c is not currently keeping up with inflation. This results in constant reduction of buying power.

[cologero]

Good evening and thanks everyone for the honest feedback! I'm happy to hear that I'm not a lost cause at this point!

As far as my risk tolerance, I don't want to be crazy aggressive, but I think some sort of medium tolerance would work.

I just found out that my employer matches 4% of contributions through a company called CPI. Not sure who that is, but I'm thinking my Roth IRA's should go through Fidelity or Vanguard still. Anyways, the more I think about it, the more I'm feeling pretty good about putting $5,500 in a Roth IRA (for 2013), paying off my car and student loan ($16K), and contributing 15% into my 401K every month beginning January 1st. This would still leave me about $9-$10K as an EF with an additional $10K rolled over from another employer.

Does this sound like a good "starting plan?"

[jIM_Ohio]

I just returned to work in corporate America, and while an IRA gives more choices, it was much easier for me to set my 401k to 20%$, establish a new budget based on 20% less, then once I settle into budget I will open my etrade account and diversify away from 401k.

Every 401k has additional fees, the question is how transparent are they?

[LivingAlmostLarge]

I like your plan. It's a great starting point.

[cologero]

I like your plan. It's a great starting point.

Thank you, it's nice to have some reassurance!

[TBH]

I like your plan. It's a great starting point.

I agree!

Go for it and come back in a few months and tell us how your new budget and savings plans are working out.

[cologero]

Hello, SA friends! Quick update since it's been a couple years (I'm now 38 yrs old). Well, there was some good and there was some bad! I won't get into the details of the bad, but here's where things shake out now. I think I'm still doing ok, but would appreciate some feedback.

Current Savings:
- $17,000 in savings
- $18,000 in Roth IRA
- $10,000 in Traditional IRA
- $30,000 in 401K
- $1,000 in HSA
- I'm selling my sports car (2nd vehicle) but probably won't sell until the spring. It's paid off and will add approx: $20K more to my savings.

Debt:
- Monthly bills: $1,950 (=50% of take home pay which is now $3,850/mo.). This includes rent/utilities, cell phone, gym membership, cable/internet, insurance, charitable giving, church giving and car payment (owe $11,000 @ 2.5% and it's valued at $25,000).
- Rental house: Owe $39,000 and it's valued at about $39,000. It's occupied by a relative and currently does not cost me anything (although I'm not making anything off it either). I'm ok with this for now.
- Credit Card: $0.

I've been able to max out my Roth IRA 3 years in a row with Vanguard. In addition, $540 total is going into my 401K every 2 weeks. That gives me the full employer match. I'm not maxing the 401K because I decided to give a bit more to my church every month.

While I've made progress, I still feel stressed. Am I doing ok? Should I keep on this path? Should I suck it up and give more to my 401K? Should I take another $5,500 out of my savings and put it in my Roth in Jan...or should I keep it at the level it's currently at.

P.S. I never did buy a home and would still like to down the road. Not sure how much I'll need to put down, but I'm thinking I'll need $10-$20K when I'm ready. No rush though as I just signed another 1 year lease on my apt.

[Petunia 100]

How are your Roth and traditional IRAs invested? Are you investing sensibly and keeping your costs low? Costs compound against you and can take a huge bite out of your nest egg if you are not careful.

Tell us more about the rental house. You do want to have cash on hand to handle repairs, so your 17k e fund does not seem excessive. If you do sell the 2nd car, yes, tuck another 5.5k into your Roth.

[cologero]

How are your Roth and traditional IRAs invested? Are you investing sensibly and keeping your costs low? Costs compound against you and can take a huge bite out of your nest egg if you are not careful.

Tell us more about the rental house. You do want to have cash on hand to handle repairs, so your 17k e fund does not seem excessive. If you do sell the 2nd car, yes, tuck another 5.5k into your Roth.

Roth - 75% Vanguard 500 Admiral shares, 25% Vanguard Intermediate-Fund bonds.

401k-spread between 6 small to large cap funds. 6.5% return for the year thus far.

The renter covers any expenses/repairs...he's lived there for 8 years and nothing major has really come up. Not too worried about it.

[LivingAlmostLarge]

Wow you came back. And good progress.

[scfr]

A couple ideas to consider:
1. Fund your Roth IRA with the proceeds from the sale of the sports car.
2. Increase your 401K contribution by 1% of income. See if you are still able to meet all your other commitments (including church contributions). You may find that you really don't notice a difference. If that goes well, think about increasing it by another 1%, etc.
3. Decide if you plan to buy a house or not when your current lease expires. If you aren't already doing this, visit some open houses if you have any spare time on the weekends. If you think you'll want to buy a house, figure out how much you'll want for a down payment and figure out your plan to have that saved up.

[Fishindude77]

You're not in bad shape. There are a whole lot of 35 year olds that can't say that they have $40K saved.

I'd get in the 401K plan taking advantage of all of the match and up to 10% or so. Talk to your plan administrator to get it in the right investment pools, then let it ride checking on it periodically.

Then I'd work towards paying down all personal debt as rapidly as possible and work towards living a debt free, cash & carry lifestyle. This will free up cash and open up other investment options. Sounds like you are being nice to a relative on that rental property, but it really needs to be profitable. Where does the $$ come from when it needs a new roof or furnace?

[LivingAlmostLarge]

You will have $20k after selling sport car. I'd put $5500 in Roth IRA this year and in January 2017. This will leave you with $9k. I'm weighing paying off the car versus saving it in case you want to buy a house. What's your monthly car payment?