Our financial system is crumbling this week.

[Michael]

Now what to do with it?

This is a really nice deal: https://www.bogleheads.org/forum/viewto ... st=3415878

Here's their website: https://www.ally.com/bank/cd-rates/

[Smith Corks One]

So this seems like the thread for financial advice and opinions, so I guess I'll go ahead and throw this question out there. I'm around 40 years old, and have never invested in my life - as a teacher, I've never really had money to invest, although I'm sure I could have cut some corners here and there to save money. Whatever. As a teacher, I also have a decent retirement plan, but I'm in Illinois, so who knows how much that will be pillaged before I reach retirement age. So long story short, I've decided it's time to do some basic investing. Now I know absolutely nothing about investing, and frankly have no interest in learning much about it. I want to be completely hands-off about it; open some initial account, make monthly contributions, and hopefully have something decent in there in about 25 years.

I met with a financial adviser just to see what the best options were. I was considering a 403b, but he said it would be better to start with a Roth IRA. After some research, I agreed - no tax deductions on contributions, but no taxes or penalties on anything withdrawn after age 59.5. Anyhoo, he wants me to go with something called American Funds. Apparently they have a 5.75% front load fee, which I guess means that 5.75% comes out of every contribution up front. This is in addition to an expense ratio (whatever that means) of .68% and I guess a 12b-1 fee, again whatever the hell that means. The bottom line is that some Googling of various financial discussion boards seems to indicate that pretty much everyone thinks these American Funds fees are way too high and just a terrible idea. I'm wondering what the financial gurus of GRB think. And if that's a bad idea, what's a good alternative? Again, I just want to make contributions and do nothing else. Vanguard seems to be recommended a lot; what about one of their Target Retirement funds? I'm only able to scrape together probably $1000 to start, and they only have that low startup minimum on the Target Retirement funds and Vanguard STAR funds, whatever that is. Then I will make monthly contributions of probably $100 for a while, until my car and house are paid off and I can start raising that considerably.

Anyway, any advice for an absolute financial imbecile is appreciated

[Joe Shlabotnik]

So this seems like the thread for financial advice and opinions, so I guess I'll go ahead and throw this question out there. I'm around 40 years old, and have never invested in my life - as a teacher, I've never really had money to invest, although I'm sure I could have cut some corners here and there to save money. Whatever. As a teacher, I also have a decent retirement plan, but I'm in Illinois, so who knows how much that will be pillaged before I reach retirement age. So long story short, I've decided it's time to do some basic investing. Now I know absolutely nothing about investing, and frankly have no interest in learning much about it. I want to be completely hands-off about it; open some initial account, make monthly contributions, and hopefully have something decent in there in about 25 years.

I met with a financial adviser just to see what the best options were. I was considering a 403b, but he said it would be better to start with a Roth IRA. After some research, I agreed - no tax deductions on contributions, but no taxes or penalties on anything withdrawn after age 59.5. Anyhoo, he wants me to go with something called American Funds. Apparently they have a 5.75% front load fee, which I guess means that 5.75% comes out of every contribution up front. This is in addition to an expense ratio (whatever that means) of .68% and I guess a 12b-1 fee, again whatever the hell that means. The bottom line is that some Googling of various financial discussion boards seems to indicate that pretty much everyone thinks these American Funds fees are way too high and just a terrible idea. I'm wondering what the financial gurus of GRB think. And if that's a bad idea, what's a good alternative? Again, I just want to make contributions and do nothing else. Vanguard seems to be recommended a lot; what about one of their Target Retirement funds? I'm only able to scrape together probably $1000 to start, and they only have that low startup minimum on the Target Retirement funds and Vanguard STAR funds, whatever that is. Then I will make monthly contributions of probably $100 for a while, until my car and house are paid off and I can start raising that considerably.

Anyway, any advice for an absolute financial imbecile is appreciated

Three words:
Vanguard Index Funds

If you don't want to watch the markets and want as decent a return as you can expect, Vanguard has very good, low-fee mutual funds that track the major market indexed.

You can also find 'target retirement' funds at Vanguard and other places if you REALLY don't want to be bothered. Pick a target retirement year and round to the nearest 5. Then google 'Retirement Fund YYYY' where YYYY is the year. These funds will automatically change your investment mix to make your fund more conservative as you approach retirement.

IMO.

YMMV.

IANALOAFP. ( I Am Not A Lawyer Or A Financial Professional)

[IMADreamer]

So this seems like the thread for financial advice and opinions, so I guess I'll go ahead and throw this question out there. I'm around 40 years old, and have never invested in my life - as a teacher, I've never really had money to invest, although I'm sure I could have cut some corners here and there to save money. Whatever. As a teacher, I also have a decent retirement plan, but I'm in Illinois, so who knows how much that will be pillaged before I reach retirement age. So long story short, I've decided it's time to do some basic investing. Now I know absolutely nothing about investing, and frankly have no interest in learning much about it. I want to be completely hands-off about it; open some initial account, make monthly contributions, and hopefully have something decent in there in about 25 years.

I met with a financial adviser just to see what the best options were. I was considering a 403b, but he said it would be better to start with a Roth IRA. After some research, I agreed - no tax deductions on contributions, but no taxes or penalties on anything withdrawn after age 59.5. Anyhoo, he wants me to go with something called American Funds. Apparently they have a 5.75% front load fee, which I guess means that 5.75% comes out of every contribution up front. This is in addition to an expense ratio (whatever that means) of .68% and I guess a 12b-1 fee, again whatever the hell that means. The bottom line is that some Googling of various financial discussion boards seems to indicate that pretty much everyone thinks these American Funds fees are way too high and just a terrible idea. I'm wondering what the financial gurus of GRB think. And if that's a bad idea, what's a good alternative? Again, I just want to make contributions and do nothing else. Vanguard seems to be recommended a lot; what about one of their Target Retirement funds? I'm only able to scrape together probably $1000 to start, and they only have that low startup minimum on the Target Retirement funds and Vanguard STAR funds, whatever that is. Then I will make monthly contributions of probably $100 for a while, until my car and house are paid off and I can start raising that considerably.

Anyway, any advice for an absolute financial imbecile is appreciated

Three words:
Vanguard Index Funds

If you don't want to watch the markets and want as decent a return as you can expect, Vanguard has very good, low-fee mutual funds that track the major market indexed.

You can also find 'target retirement' funds at Vanguard and other places if you REALLY don't want to be bothered. Pick a target retirement year and round to the nearest 5. Then google 'Retirement Fund YYYY' where YYYY is the year. These funds will automatically change your investment mix to make your fund more conservative as you approach retirement.

IMO.

YMMV.

IANALOAFP. ( I Am Not A Lawyer Or A Financial Professional)

I agree with this. That fee that guy wants is insane. Just go to vangaurd, pick a targeted fund, keep adding and forget it.

[Swirls]

Agreed. Those fees are ridiculous.

Expense ratios are basically just fees tied to whatever specific mutual fund you are investing in (such as Vanguard Target Retirement 2050). Every fund has them, and they vary dramatically based on fund type and whatever company you are using for your investments. They're a percentage taken off your profits... So if your fund yields 5%, but you have a 0.5% expense ratio, your net profit is actually only 4.5%. So obviously you want your expense ratio to be as low as possible.

If you're torn between two investments that are both basically yielding the same interest rate, go with the one with the lower expense ratio. I try to keep mine under 0.1% if possible (I think mine are all around 0.05%).

[Leroy]

I'm a tax guy, but if asked:

A Roth is great if you aren't in a high bracket now, but expect to be in a higher bracket after retirement (not most of us).

An IRA is better if you expect retirement income to be lower than current. Yes you are taxed, but deferred bigly.

[Smith Corks One]

Sounds good. Thanks guys.

[Michael]

Smith Corks One, that financial adviser is just plain awful. In my opinion, unless you are a high net worth individual, financial advisers generally aren't very helpful if you spend a little time figuring things out yourself. Personally, I really like bogleheads.org.

Like others on here, I opened up a roth on vanguard and I purchase funds every year. If you're unsure on what to buy and want something low maintenance, the vanguard target funds are excellent for tax deferred accounts like a roth. It's all very easy to do yourself.


In summary: My post didn't really add anything that wasn't answered elsewhere.

[lukethedrifter]

I sure wish I had started putting more money into a retirement plan earlier but what are you gonna do. I put what I am able via our deferred comp plan into three different funds- one of which is a targeted vanguard fund. They just made after tax Roth contributions available so I am throwing a few bucks into that as well. I really haven't been able to conclude that before or after tax contributions are the absolute way to go.
Smith, didn't you say you were a school teacher? So you have a defined benefit pension? Illinois, thus concerns about whether it'll actually be there for you when you retire? I have those concerns myself. I contribute 9% of my gross and have to hope my employer doesn't go insolvent.
We also have a DROP plan so I have to figure out if/when to go that route.

[Arthur Dent]

I really haven't been able to conclude that before or after tax contributions are the absolute way to go.

For me, it makes more sense to do after tax contributions in a Roth IRA rather than a employer plan because, in the case their were some kind of emergency where I really needed to tap those funds, I can withdraw the principle (though not the interest) without penalty. In fact, for similar reasons, I only contribute enough to my employer plan to get the full match and instead make extra contributions to the Roth IRA. With a 401k, you have to get the plan's permission with a justification that's on their list to make an early withdrawal.

The combination of the two gives me a mix of both before and after tax dollars, which seems like a good hedge your bets plan.