Investing in our various retirement accounts

[fealty]

We've worked hard to get debt-free. We are a bit late to the investing game and I want to make sure we set this up right as we are now in a place to set up auto-contributions and just let them work.

H (37) makes $85k/yr plus a $15k bonus. His company contributes 12% to 401k despite your contribution.

I (31) make $53k/yr. I work in the public sector and have a pension option. I pay 5%/paycheck into the system and I get 1.6% average salary x years of work (fully vests after 5 years, I'm 2 years in). I also have a ROTH IRA that I contribute to and now max out, rolled an old 401k into it. I should average 5-7% increase in salary annually.

Currently H has $75k in 401k, $3k in Roth IRA, and I have $15k in my Roth IRA.

We have no debt, cars are paid off. Only debt is mortgage. Have $25k in HYSA for e-fund and various sinking funds.

Our accounts are with Vanguard, and currently we are only investing in the VFIFX 2050 funds. We have $4000/mo leftover each month, I am increasing H's 401k contribution to 8% and will hope to max out each Roth IRA. Is there any downside to sticking to this one fund? Should we diversify at all or just leave it as is? Anything I'm missing?

 

[wendyhughes30]

@fealty $4000/mo left on a combined 128k salary?? You should be putting all that into Roth IRAs and 401ks right now while you have this luxury of extra cash. With only 93k balance in the 401k and Roth ira, you’re a bit behind (IMO) so crank up those contributions! To give more perspective, I’m married, 38 and have about 750k in retirement accounts. Our combined salary has ranged from 80k-200k and now down to 160k throughout the last 15 years as a couple.

To answer the other question, the target date fund you have isn’t just one fund, it’s a mix from a broad market. It’s probably the best choice you can make without thinking about it much. I started in a target date vanguard fund at first and was very satisfied with it for years.

 

[mommamiame]

@fealty You ain't late tho you're doing the best you can. And 4k extra a month with no debt is awesome! I'd do the following

1. Max out ROTH IRAs: When you retire, you'll withdraw the money in your ROTH last because all the growth is tax free. You want to contribute to your ROTHs as early as possible so it has the longest possible time to grow.
2. Max out 401k: There's like 5 things the government allows working folks to use to build some wealth. A 401k is one of them. Max them out and write off your contributions to lower your taxable income.
3. Invest in Total Market Index Funds: My problem with target date funds is that they adjust for you which increases their turnover which can increase taxes and fees. Plus if you're still in your 30s do we really need bonds? Like you got another 20-30 years to go and really don't need bonds to hedge against risk at this point. I'd go full market and invest in VOO or FXAIX because stocks will grow more in those 30 years than the bonds that are in your current target date fund.
4. Open Brokerage and Put Anything Else There: Even though you're not protected from taxes here, investments in a brokerage account have no age restrictions on withdrawals. If you want to retire early, you may want to beaf up this account because you won't be able to access your 401k/ROTH funds until 59.5 years old.

 

[michael90]

@fealty I would max out IRAs, contribute as much as possible to qualified employer accounts, put around 20% of your total saving contributions into permanent life insurance for the tax advantages - just be careful where you do it. NM is usually the best, NYL and MM are okay ish.