Start as early as possible in investing (in index funds) and otherwise being financially savvy. It is very beneficial to realise early on that growing your hard earned money and spending it wisely is way more important as it will in the future lead to some unexpected benefits. Freedom of thought and action!
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I didn't start investing until I understood it.
This is a fantastic course. It covers a lot of ground.
If you want to actively invest, this will help you learn the mechanics. But in the end, what you really learn, is that you can't beat the market.
https://ocw.mit.edu/courses/15-401-finance-theory-i-fall-200...
Excellent resource. The videos link to a YouTube channel with a treasure trove of content in multiple disciplines. Thanks for sharing!
buy vti and wait. thats it
I think that works if you have less than $1m. But if you have more wealth and are older, you need to diversify a bit more.
ok then buy a bond etf. its not difficult or complex. only if you talk to someone who makes money in mutual funds
Call Vanguard: 877-662-7447
An investing prof at Chicago puts this on the whiteboard at the start of semester, saying this is really all most people need to know and this class is unlikely to learn anything in his or any class that will let them, personally, do better.
That’s good advice for a layman but most high earners can do much better if they care and are motivated. Most are neither though lol.
Mostly on the tax side. Some specific examples:
- after maxing out your 401k what should you do next? IRA? Mega backdoor roth? Something else?
- If you have kids, how to best save for future education expenses? Hint: consider 529 plan.
- HSA is technically the best tax advantaged account, most high earners don’t realize it and “waste” the HSA funds to reimburse typical medical bills. HSA has triple tax benefits: contributions are tax-free, growth is tax-free, and withdrawals are also tax-free after age 65 for any reason, not just medical expenses. So basically investing without any tax obligation. You can also withdraw tax free before 65, but for medical expenses only.
i could go on…investing is great, but reducing your tax obligation is an even more powerful technique if you want to grow your net worth.
What you have stated is almost the same as call Vanguard, all those options are the same in the sense that they all involve investing, leaving it alone for a long time. Its just the vehicle thats slightly different and tax advantages.
I wouldn’t consider those options needing much motivation or research. The key with all of them is investing early and leaving it alone.
If one is clueless with investing and taxes in general, and they call vanguard, their eyes will glaze over. It would be like me explaining software development to my 85 year old father.
I do agree people should call vanguard. But just blindly following steps they give you is unlikely to be productive if you don’t understand why you’re doing those steps. Furthermore, those people who don’t understand _why_ will freak out every time there’s a huge market correction. They get scared - because they don’t understand any of it.
I’m also curious, do they offer financial advice for your accounts outside vanguard? Genuinely curious since i’m unsure.
Looked into HSA recently at work but legally you need a high deductible health care plan to be eligible. Looking at the options, just nothing looked good compared to my current $0 deductible/$0 co-pay plan. Hard to know for sure but just seemed like I would be paying a lot more out of pocket every year.
Yeah get a high deductible plan as secondary insurance JUST for the HSA
Max out contributions to the HSA
all medical expenses (except for premiums) since the beginning of the hsa account’s existence are eligible for reimbursement, decades later
You have the unicorn health plan it appears
The HSA thing intrigued me and so I did some digging. It appears that post-65, you still have to pay income tax on non-medical withdrawals from an HSA? That is, besides the tax-free-for-medical-expenses part it reverts to a traditional IRA?
One additional trick though is that it looks like you can pay for any HSA-eligible medical expenses (incurred after you created the HSA) out-of-pocket now, and reimburse your bills at any point in the future? Thus you can still earn interest on the cash before withdrawing it at any point in the future (treating it as tax-free liquidity).
(I don't fully understand this so these are questions not statements, but hopefully I'm correct!)
> The HSA thing intrigued me and so I did some digging. It appears that post-65, you still have to pay income tax on non-medical withdrawals from an HSA?
That's what I understood too. That claim that you can completely skip taxes looks wrong.
i replied below already, i misspoke. Apologies!
Yes and you can invest your HSA funds just like anything else.
#1 Rule of Investing: you can't beat the market, but you can beat the tax man
Is is beating when taxes are setup in a way to incentivize investing ?
i tried that hack one year. Cigna just emptied my account on the first try with a provider charging 2 emergency room visits when I was there only for a xray.
Cigna refused to lift a finger unless i sued them both.
yeah, i wouldn't recommend that.
At that point get someone to do it for you for x% of what they're getting you back and live blissfully unaware of arcane tax code specifics.
At least the 401k, IRA, and HSA don't require knowing anything particularly arcane. Money goes in, don't touch until 59 1/2 (401k, IRA) or 65 (HSA).
529 plans can get a bit more complicated because you'll want one from your state (if your state has an income tax) and they may offer several, but then it's less about knowing tax code specifics than about what the differences are between their offerings.
Is it really x% of the profits? Most of the investment and financial advising services that I've had pitched to me (although that's not too many, tbh) seem to charge x% of your portfolio, and if their sage advice doesn't create a return greater than x% then sucks to be you.
> what they're getting you back
Even that is not a simple thing. What’s your benchmark? Is that the right benchmark for you and your goals? Agency has a cost.
This is generally not applicable to most people.
1. Invest enough to get the company match in an S&P 500. It probably isn’t Vanguard that your company uses
2. Pay off all of your debt except your house (and maybe your car)
3. Max out your HSA - if you are married it’s - $8550
4. Max out your 401K - again that’s probably not through Vanguard - $23500
5. Step 5 - then call Vanguard and depending on your income just do a Roth up to $8000 (?).
(Unless you are over 50 then do catch up contributions as 4.5)
If you are under 50, you can do $40,500 tax advantaged and over 50 $48050
Step 0: Have enough extra money to do all that.
And also Step 4a: Don't need to use the healthcare system.
Step 6 is the mega-backdoor Roth. Do after tax contributions to your 401k and have your 401k servicer do an in-plan conversion to Roth 401k.
Also, on step 4, you may need to do a backdoor Roth IRA if you’re over the Roth IRA income limits.
I’ve only had one employer that allowed after tax contributions (which for other people reading this is not the same as Roth 401K).
The issue is that most companies don’t allow it because of compliance reasons and rules regarding highly compensated employees. Of course the one company that did allow it was BigTech.
Not that I’m missing much. I doubt I will be in a higher tax bracket at retirement than I am now and I live in a state tax free state.
For those of us very late to the investing game, what is the best strategy to try to catch up at least somewhat?
An important part that could have been beneficial would have been to add, "today".
I had a class where the teacher did something similar, but she showed that if you started a ROTH today and contributed only the 4 years you were in college and then stopped forever. You would have nearly the same amount of money as someone who started 1 year after they completed college and invested every year until retirement.
Ultimately she was encouraging us to take out student loans and invest it or use any excess scholarship money to max out a ROTH IRA. She even advocated for investing all student loan money and opening credit cards tp actually pay for college, making minimum payments until graduation. Then moving away to a LCOL country and learn the language for 8-9 years while remaining in school taking 1 online class a year and travelling the world on student loans and not to worry about starting a career until 30 and start paying once you are back and start a job.
The today does matter but just did the math on that and your teacher was whack.
The gap is so big I’m going to be imprecise and won’t matter.
A Roth allows 7k a year I believe. So 4 years of school, 28k total.
Let’s be generous and say you start with 30k at age 18. At 65 you’ll have 700k.
I started at 26, my salary has been increasing at 6k a year average. I don’t max it out, but hover around 10-15%, I get a 100% match on up to 7% of my salary. I’m 10x ahead of the 18yo on the same projection and 5x ahead 10 years earlier.
Not even going to get into the interest rates and how you’re fucking up your finances tremendously for the rest of your adult life
ROTH IRA contributions have to be from earned income, though. The rest of the advice is of the same quality, imho. Beware!
There are limited ways of acquiring money that can be contributed to a Roth IRA, this way is not one of them
My millionaire, step-father-in-law, gave this advice to my brother when graduated.
I was lucky, my physics department administrator told me the same thing when I was graduating.
The 2ND best piece of advice is to rollover your 401k when you move to a new company -> this cost me at least 500k because they effectively stagnate when your company isn't paying the maintenance cost (AIUI).
> this cost me at least 500k because they effectively stagnate when your company isn't paying the maintenance cost
Is this true? My understanding is that the fees come out of the account itself. There's other good reasons to roll over (primarily investment flexibility) but I have not heard of something like this.
I don't think the point about 401k stagnation is true. At most fee structures and optionality of funds change. How did that cost you 500k exactly?
Especially, if you don't want to invest in a bitcoin ETF
https://markets.businessinsider.com/news/etf/bitcoin-etf-van...
Why are we advertising this particular broker?
Vanguard is one of the cooler-structured brokerages. Vanguard (the management firm) is owned by the mutual funds themselves, of which you are an investor of. So their shareholder obligation is genuinely towards "clients" of the individual mutual funds. As far as I'm aware, this is the only mutually-owned mutual fund firm.
It's definitely got a solid track record and good fees, but these are things I'd feel weird about advertising it on HN for.
vanguards very large and they're a mutual fund, so they have a lower profit motive than most brokers for it. they're basically the standard retirement fund company now
My mistake was not starting early, because the numbers were small and it didn’t seem worth the time. The habit and systems are important to build, so that when the numbers do get bigger it goes to the right place.
my mistake was to graduate in 2008 and then start a business right when covid hit.
In other words, 2008 had no meaningful impact on you then.
I also graduated in 2008.
Starting my adult life with the markets in freefall made it hard to get in the habit of investing. All through school, people told me "most people don't start investing until their 30s, and end up in a worse than they ought to because the time-value of money compounds a bunch if you add a few more years." I thought I knew better than to be one of those people.
Instead, I ended up keeping a lot of savings in cash during years when the interest rates were approximately 0. I've tried to get better at putting money into the markets over the past few years, but my financials look very different than they might have.
> In other words, 2008 had no meaningful impact on you then.
People who graduated in the late 00s might not have accrued big financial losses, but it had a very meaningful impact on my comfort investing.
Compounding interest is a powerful force.
Get a financial advisor that you trust.
But to trust one you need to have the knowledge, might as well DIY at that point.
Use word of mouth. Or relative's recommendations. You're right that nothing is guaranteed.