Where to start?

[ShawnRPrice]

Hello, this is my first post here. I am 40 yrs old. Retired military. Married with four children that are almost out of the house. I have never invested before( I know I'm way behind) and was wondering what others would do if they were in my shoes. Currently I receive 35.8k per year from my military pension. My civilian job, I make 48.8k per year. My wife makes 48.5k per year. We live well within our means. We don't have a large house payment, approx $960/month including taxes. We do not have new vehicles. Both auto payments combined are $650/month. We have one credit card with 2.5k balance.

My question is if you were in my shoes and had to start from scratch, what would you do.

Both my wife and I are not investment knowledgable at all. First Command keeps calling wanting me to invest through them but for some reason my gut tells me to look elsewhere.

[rennigade]

Do your jobs offer a 401k? I would start there. Contribute as much as you can.

I would also look into Roth IRA's. Easy to set up and fund. I set mine up through Vanguard. I picked a target retirement fund. No complaints so far.

[kork13]

Please please please please -- DO NOT even consider working with First Command. Tell them never to call you again, hang up, and don't answer calls from them. For years they have proved themselves to be unethical and have exploited current & former military members & their families with outrageous fees, predatory customer recruitment (as it seems you are experiencing), abhorrent customer service, and extremely poor asset management. "Fiduciary obligation" is not really a factor with them, and they have been the subject of multiple class-action suits & SEC violations. I'm in the military myself, and have been repeatedly been warned away from them, and for good reason. Search the internet or other financial forums (like Bogleheads) to learn about them, and I guarantee you'll never want to talk to them again.

As for where to start, first check into the 401k offerings from your employer & your wife's employer. If they offer any sort of matching funds, take full advantage of that immediately. Invest in a few simple, low-expense index mutual funds, or as a place to start, a target-date retirement fund aimed around the year 2035 would also be appropriate. If you detail what you have available in your 401k's, we can give some more specific advice on selecting funds.

Beyond your 401k's, look into starting a Roth IRA for you and your wife. Vanguard & Fidelity are both excellent companies to use, as they offer very low-cost index mutual funds that will help you manage a simple portfolio with minimal expense. You would want to find similar index funds as I mentioned for the 401k's -- broad market index funds, or a 2035 target date fund.

The last big item you need to consider right now is asset allocation -- basically, how you want to invest. Stocks, bonds, international, REITs, and a plethora of other options exist, so you want to identify how you want to balance the different options available to you. For some good reading to help isolate that, check out these threads:

http://www.savingadvice.com/forums/investing-banking/55667-asset-allocation-401-k.html

http://www.savingadvice.com/forums/investing-banking/50669-questionaire-people-starting-retirement-planning.html

**One add-on note for asset allocation... You can likely go with a lower-than-normal bond allocation & focus on growth-generating stock equities, since you already have a guaranteed federal pension that covers (I'm guesstimating) 30%-50% of your current/future expenses. Your military pension is roughly equivalent to having a $900k income-generating portfolio that keeps up with inflation.

Otherwise, continue asking questions around here, we're all happy to help. There's a lot of experience between all of us here, and you'll get some excellent help if you ask some detailed questions... The more info you're willing to share (about income, expenses, assets, debts, financial goals, and so forth), the more precise advice we can give you.

[snafu]

Shawn, welcome to this site where we help each other with suggestions to help us get more 'bang for our buck.' I believe there are other factors you might look at as part of your overall retirement plan. Most of us advocate using credit cards for convenience and avoid paying interest or fees by paying the balance due at least one business day in advance of the Due Date stated on your bill. You didn't mention the sum outstanding on your mortgage or it's interest rate. Many participants on this forum have set paying off their mortgage as quickly as possible as a major goal due to the way the amortization schedule works.

Once you and DW join your employers 401k, I hope you'll discuss investment choices here on the forum. It is important to avoid the excessive fees and expenses often called MER [Management Expense Ratio} which silently transfers your earnings away.

[Chris Leese]

Looking into 401ks with your employers are the best starting point to get your started especially if they provide a matching contribution.

Next, I'd start with education. There are many websites out there that provide information for free at least to build a foundation/the basics of investments and your options. Of course, there are books as well... There are many different investments and you will need to determine which you are comfortable with. Be sure to consider appropriate diversification (don't put all you eggs in one basket).

You should take a look at your overall financial picture by creating a budget to see how much money you can allocate to investing ---- I use a budget system of splitting my income into 3 categories -- spending (living/lifestyle expenses), savings (essentially my emergency/liquidity fund) and then wealth building (investments).

Then...take action!!!

[ShawnRPrice]

Everyone,

Thank you for the advice. Sorry it has taken me so long to respond and answer a few questions and give a little more info on my investment options.

@snagu, my mortgage balance is 113,000 @ 4.5% interest.

A little more info on my employer's 401k. They match 100% for 2% of my income. They also after working for them for 5 yrs (I just started with them) will contribute 1.5% even if I don't contribute anything. Then at 10 years they contribute 3% regardless of what I do. Per there program I can contribute up to 50% of my income or until I hit the IRS limit.

I can afford to contribute 30% of my income but was wondering if I should or if I should contribute less and start a Roth IRA for both me and my wife.

Btw, my wife has a employer 401k that we are all ready contributing to as much as they allow.

[ShawnRPrice]

Deleted...double post

[snafu]

What choices are offered by each of your employer's 401K? It's important to know whether there are administration fees for the programs offered and the MER [Management Expense Ratio] of the specific product offered. I too support Kork's suggestion for Vanguard's or Fidelity's Index for your Roths.

I hope it's ok to mention a couple of books that are quick and easy reads like The Automatic Millionaire [David Bach} Culture Clash [John Boggle] or Wealthy Barber [David Chilton] which are available from your library or inexpensive on e-bay. We want you to be successful and feel comfortable and confident with your investments.

Are you still carrying a CC balance of $ 2.5K? What interest rate? How much did you pay in interest for that card in 2013?

[Like2Plan]

Hello, this is my first post here. I am 40 yrs old. Retired military. Married with four children that are almost out of the house. I have never invested before( I know I'm way behind) and was wondering what others would do if they were in my shoes. Currently I receive 35.8k per year from my military pension. My civilian job, I make 48.8k per year. My wife makes 48.5k per year. We live well within our means. We don't have a large house payment, approx $960/month including taxes. We do not have new vehicles. Both auto payments combined are $650/month. We have one credit card with 2.5k balance.

My question is if you were in my shoes and had to start from scratch, what would you do.

Both my wife and I are not investment knowledgable at all. First Command keeps calling wanting me to invest through them but for some reason my gut tells me to look elsewhere.

Good advice so far. It sounds like you have a good handle on First Command. I haven't looked at this company lately, but they used to charge huge front loads on their investment products--with very little actually getting invested (Years ago, when they went by a different name, they used to sponsor "free" steak dinners where they would give their sales pitch. You have to figure they had a lot of overhead to cover. )

Anyway, if you are going to get the advice of a certified financial advisor--get one that is paid by a fee only, not by commission. But, even if you are going to go that route it is a good idea to read up on investing. The Boglehead website that Kork gave a link to is an excellent place to start.

Some housekeeping items. I notice that you have a 2.5K bal on a CC. If I were starting from scratch, I would work on getting that paid off ASAP. What kind of interest are you paying on your auto loans? Do you have an emergency fund? Will you be contributing any money towards your children's college? The answers to these questions would have a bearing on the investment choices.

A good first step would be to contribute to your 401K up to the match. The match is free money that you don't want to leave on the table. 401K's do have a notorious reputation for having high fees--although, some large companies have fees that are extremely low. As Kork mentioned, you'll want to pick something within your desired asset allocation with low fees.

Next, do you invest more in the 401K or do you invest in a Roth? That is a complicated question. The answer will depend on your tax situation (would you benefit more by putting the money into a pretax account?), the fees (are the fees lower in your 401k?), asset allocation (are there investment options in your asset allocation in the 401k) and how soon are you going to need the money (is it strictly for retirement or, will you have a need for the money sooner)?

[feh]

My question is if you were in my shoes and had to start from scratch, what would you do.

Educate yourself. Read about personal finance and investing. Start here:

http://www.bogleheads.org/wiki/Bogleheads%C2%AE_personal_finance_planning_start-up_kit

http://www.bogleheads.org/wiki/Bogleheads%C2%AE_investing_start-up_kit

[bjl584]

Welcome.

First, do you have any assets or savings at all? If not, you will want to start saving up an Emergency Fund. Paying off the credit card should also be a top priority.

[LivingAlmostLarge]

If you qualify for a Roth IRA try to contribute by april 15th for 2013. Limit is $5500 for under 50 Then also do the 2014 Roth IRA.