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I'm young and have no clue what I'm doing.

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Alvarez2007
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I'm young and have no clue what I'm doing.  Reply with quote  

Hey everyone, I'm currently 1.5 years out of college. I work as a dental hygienist where I make around $50,000 a year. I don't plan on keeping my current job forever, and in dentistry finding a job that has benefits isn't so common. My 401K kicks in in about 1 year. That being said, I have a few questions. I want to be as well off as possible when I'm older. I'm very good with finances (I have a pretty hefty savings account after only working for a year, and I also have life insurance), but am ignorant about savings plans (if that makes any sense). So, here are my questions.

1) Because I chose to be in a field where retirement isn't always guaranteed, where would be a wise choice of having a second retirement plan/A second 401K? Is it even possible to have two different retirement accounts?

2) After I sign up for my 401K in a year, would I be allowed to add to that fund if I decide to find another job that does not have benefits?

To put it in simpler terms, if I end up having no retirement benefits later on in life, where can I start investing? I don't want to just "save", I would like to have a pay off later on.

I hope this makes sense. Suggestions highly welcome!
Post Tue Oct 14, 2014 6:16 pm
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oldguy
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You're right, you cannot "save" your way to wealth, instead you must "invest".
Eg, saving $5000/yr for 30 yr is only $150,000. But investing $5000/yr @11%/yr is $1,100,000.

As for more tax deferred accounts - the max is $17,500,yr, cum. But you can (and should) have a plain old brokerage account - money that is accessible at any time at any age - funds grow tax deferred, get preferences cap gains tax if you sell.

BTE, who is the life insurance for, how many dependents? Very Happy Smile
Post Tue Oct 14, 2014 10:47 pm
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Alvarez2007
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The life insurance is only for me. I have no kids and am not married.

Alright, so here is me being even more naive about this, haha. Brokerage accounts sound terrifying... especially since I'm "financially inexperienced". Can you give me any advice on setting one up? What would the process be? And what are the cons?
Post Wed Oct 15, 2014 2:59 am
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Publius
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oldguy's point in asking who the insurance is for is to point out that if you don't have any dependents, you don't need life insurance at this time. The purpose of life insurance is to provide for those that are dependent on your income after you are gone. If you don't have anyone that has a need for your income to be replaced if you are no longer there to work for it, the money is better spent on investments or living. Is this whole life, or term?

As far as a brokerage account goes, it doesn't have to be scary or complicated necessarily. Any no-load company will provide basic advice for free and will be happy to get you started. I personally use Vanguard for everything except a 401k for which I have no choice but to use Merrill Lynch. You can go to their website and open an account and talk to a professional about the investment options open to you. I use almost exclusively no-load index funds.
Post Wed Oct 15, 2014 5:22 pm
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oldguy
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As publics said - no need for life insurance if there are no dependants to feed, house, and put thru college in your absence.
Is it term or whole? (If you 'bought' it is probably term - if you let someone "sell" it to you it is probably whole - and you should cancel)

Vanguard and Fidelity are the two major no load fund companies - we use both, our 401K and our taxable accounts. We have SP500 Index Funds, no individual companies
That keeps it simple - and gives good results
Post Wed Oct 15, 2014 6:05 pm
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Alvarez2007
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I have whole life insurance. I was always told it was like an additional savings account that I'd be able to "cash out" when I'm older...
Post Thu Oct 16, 2014 2:16 am
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Publius
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It does work like that in a way. It works like a savings vehicle that underperforms other available savings vehicles and tacks on fees for the right to use it. A young person with no dependents and who doesn't have an ultra-high income has no need for a whole life insurance policy. You will be told differently by the people that sell those policies, but do a little googling on the subject. Read a few articles on whole vs. term-life and you will see that the only people that come down on the side of whole life for someone in your situation are those that are getting a commission by selling it.
Post Thu Oct 16, 2014 11:17 am
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louiefrias
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STOP.  Reply with quote  

Before you do anything, get an executive level education on what to do.

Buy and read "Tax free retirement" by Patrick Kelly.

Focus on "A story about Bill."
Post Wed Oct 05, 2016 8:59 pm
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