How to start investing

[arehopsveggies]

After years of SAHM/ very part time work and a $33,000 household income, I’m back to work. Combined salaries are around $85k. Still trying to mostly live off one salary. So right now we have no debt but the mortgage (I think that is $120k ish left) and a little over $20k in savings. I’m trying to put $500 a week in savings(since I started working) but I don’t always quite make that goal.

Only retirement is that I paid into state retirement at my old job, so $40k ish in that account. At some point I need to see if it makes more financial sense to leave it there (which I think it does) or try and move it to my new state once I’m vested here. Paying into state retirement in my new job/state now also.

Where do I go from here? I know we are behind on investing, but those years where we were living on one salary I was just counting it as a success that we didn’t rack up any debt.

[arehopsveggies]

Other relevant info-
My kid is medically expensive and will lose medicaid in the next few months. So will need to keep a few thousand handy for deductibles etc

[dr.girlfriend]

The general strategy most people on here would recommend is:

1. Fund your 401k (if applicable) up to the level that is matched
2. Start and max your Roth IRA
3. Go back and keep adding raises to your 401k until you hit the yearly max

Do you have workplace 401k or 403b plans and if so with which company? If it's a big one like Fidelity or Vanguard I would just have them walk you through opening a Roth. Within the plans, you can just invest in target funds for your retirement date to start. They can walk you through choosing the right target fund as well.

I think you have until April 15th to fund your Roths for 2021, and then you can fund for 2022 as well, so that would be $24k unless you're eligible for catch-up based on age. So, you could use $12k of your savings to fund your Roths for 2021, and then just contribute $500 a month each to your Roths going forward, and then hopefully even extra to savings. Fingers crossed that if your income tripled you will have more than $500 a month to throw in the pot going forward.

I would also call your child's medical center and ask about financial counseling. There may be other programs to pick up the slack when Medicaid ends like Chip or SSDI, pharmaceutical company compassionate care programs, foundation or donor funds, or even just hospital-based financial assistance.

[Poppy]

Do either of you have a 401k through work?

[arehopsveggies]

Dec 21, 2021 21:32:28 GMT -5 Poppy said:

Do either of you have a 401k through work?

No, neither of us have 401k through work. I pay into state retirement and DH’s work doesn’t have anything

[sadlebred]

Dec 21, 2021 21:49:43 GMT -5 arehopsveggies said:

Dec 21, 2021 21:32:28 GMT -5 Poppy said:

Do either of you have a 401k through work?

No, neither of us have 401k through work. I pay into state retirement and DH’s work doesn’t have anything

Then I'm sure most of us here would recommend starting a ROTH account for both you and your DH (you'll each need a separate account) at one of the low cost houses. Fidelity and Vanguard are very popular. Your household income is within the income restrictions to contribute. For 2021 and 2022 you can put up to $6000 per person in a ROTH. The IRS allows you to retroactively contribute to your Roth IRA for a given tax year as long as you do it by April 15 of the following year. As an example, even if you contributed nothing to your Roth IRA in 2021 thus far, you still have until April 15, 2022 to do it....so...you could still contribute for 2021. Rather than stick $500/week into savings, put half of it into your ROTH until it's maxed out for the year assuming you have at least 3 months of emergency funds.

[Poppy]

Yes, I recommend a Roth invested in a low cost target date fund such as Vanguard Target Retirement 20xx (where 20xx roughly coincides with the year you'd like to retire - doesn't need to be exact).

[spinnaker5]

Also, index funds - you can get a mix of large cap/small cap/growth/ international equities, various bond types, and keep fees low.

[ohgillian]

What percent are you required to put into the pension system? Also you guys are in good financial shape given how low your income was for awhile.