Personal Finance 101 for Young Lawyers Forum

[kalvano]

Do you have access to a 401k? If not, open a deductible IRA account. You need to start copping dem sweet pre-tax benefits.

Once you hit a certain income level, you don't get full credit for the $5,500 IRA contribution. At that point, I'd rather stick it in a Roth and take the future benefits.

If you don't have an employer plan (and your spouse doesn't either) you can always get the full IRA deduction.

I can take the deduction, but deducting the whole $5,500 only saves like $1700 on my taxes. I'd rather go with a Roth and not have to pay taxes later on. That's more a personal call for me as I like that certainty that comes with tax-free withdrawals. I know for a fact I can take a $1700 hit right now, but I don't know what the future holds.

[Anonymous User]

Is there a consensus for PI attorneys on an IBR to use a traditional IRA over a Roth IRA to lower their AGI for monthly payments?

[Tiago Splitter]

Is there a consensus for PI attorneys on an IBR to use a traditional IRA over a Roth IRA to lower their AGI for monthly payments?

I wouldn't say consensus. If you are paid reasonably well but under the IRA deduction limits then yes, but if you make like 40k I'd probably lean towards Roth. Do you have any LRAP assistance?

[Porkypots]

so I have about 15K in savings sitting in my savings account. What is the best short term investment vehicle? I am going to need access to the money next summer when I quit my job :/

[Nosso]

so I have about 15K in savings sitting in my savings account. What is the best short term investment vehicle? I am going to need access to the money next summer when I quit my job :/

A high-interest savings account like the Ally online savings or something similar. That's $150 at 1% interest. You don't have a long enough horizon to take on the inherent risks of other investments.

[Anonymous User]

so I have about 15K in savings sitting in my savings account. What is the best short term investment vehicle? I am going to need access to the money next summer when I quit my job :/

A high-interest savings account like the Ally online savings or something similar. That's $150 at 1% interest. You don't have a long enough horizon to take on the inherent risks of other investments.

I agree with the above since you will need to access the money next summer. But what do people think about a slightly longer time horizon of 3-5 years? I have about 40k saved in about 80% stocks (vanguard S&P index fund), 20% bonds (and another 60k in retirement accounts). I'm thinking of putting the 40k towards a down payment in 3-5 years. I am torn between moving it to a 1% savings account or leaving it in the market - maybe even moving to a more bond-focused portfolio. I know the old adage of time in the market beats timing the market but it seems (in my uninformed opinion) that there could be a downturn in the next 1-2 years, which makes me want to be more conservative with that 40k. Appreciate any thoughts or advice.

[Nosso]

so I have about 15K in savings sitting in my savings account. What is the best short term investment vehicle? I am going to need access to the money next summer when I quit my job :/

A high-interest savings account like the Ally online savings or something similar. That's $150 at 1% interest. You don't have a long enough horizon to take on the inherent risks of other investments.

I agree with the above since you will need to access the money next summer. But what do people think about a slightly longer time horizon of 3-5 years? I have about 40k saved in about 80% stocks (vanguard S&P index fund), 20% bonds (and another 60k in retirement accounts). I'm thinking of putting the 40k towards a down payment in 3-5 years. I am torn between moving it to a 1% savings account or leaving it in the market - maybe even moving to a more bond-focused portfolio. I know the old adage of time in the market beats timing the market but it seems (in my uninformed opinion) that there could be a downturn in the next 1-2 years, which makes me want to be more conservative with that 40k. Appreciate any thoughts or advice.

It really depends on you, but having a portfolio that's 80% stock for a 3-5 year horizon is very risky. Most would advise against it. CDs or a money market fund could be a good middle option.

[bk1]

This seems like a JDM special: http://www.biglawinvestor.com/announcin ... ving-a-jd/

[Lacepiece23]

so I have about 15K in savings sitting in my savings account. What is the best short term investment vehicle? I am going to need access to the money next summer when I quit my job :/

A high-interest savings account like the Ally online savings or something similar. That's $150 at 1% interest. You don't have a long enough horizon to take on the inherent risks of other investments.

I agree with the above since you will need to access the money next summer. But what do people think about a slightly longer time horizon of 3-5 years? I have about 40k saved in about 80% stocks (vanguard S&P index fund), 20% bonds (and another 60k in retirement accounts). I'm thinking of putting the 40k towards a down payment in 3-5 years. I am torn between moving it to a 1% savings account or leaving it in the market - maybe even moving to a more bond-focused portfolio. I know the old adage of time in the market beats timing the market but it seems (in my uninformed opinion) that there could be a downturn in the next 1-2 years, which makes me want to be more conservative with that 40k. Appreciate any thoughts or advice.

IRA? Can't you put the 40k in then take out the contributions in 5 years. You may have already maxed your 401k and IRA though.

[North]

I just got my HSA account linked to the TD Ameritrade account it comes linked to. Anyone have any (higher risk) mutual fund recs? Seems like they have a ton.

[kalvano]

so I have about 15K in savings sitting in my savings account. What is the best short term investment vehicle? I am going to need access to the money next summer when I quit my job :/

A high-interest savings account like the Ally online savings or something similar. That's $150 at 1% interest. You don't have a long enough horizon to take on the inherent risks of other investments.

I agree with the above since you will need to access the money next summer. But what do people think about a slightly longer time horizon of 3-5 years? I have about 40k saved in about 80% stocks (vanguard S&P index fund), 20% bonds (and another 60k in retirement accounts). I'm thinking of putting the 40k towards a down payment in 3-5 years. I am torn between moving it to a 1% savings account or leaving it in the market - maybe even moving to a more bond-focused portfolio. I know the old adage of time in the market beats timing the market but it seems (in my uninformed opinion) that there could be a downturn in the next 1-2 years, which makes me want to be more conservative with that 40k. Appreciate any thoughts or advice.

IRA? Can't you put the 40k in then take out the contributions in 5 years. You may have already maxed your 401k and IRA though.

IRA's have contribution limits.

[clshopeful]

I just got my HSA account linked to the TD Ameritrade account it comes linked to. Anyone have any (higher risk) mutual fund recs? Seems like they have a ton.

SMH (ETF semiconductor fund) risky, good returns.

[TatteredDignity]

I'm starting at a firm in October. My current job doesn't have a 401k. Will the firm let me contribute the max between now and year's end?

[polareagle]

I'm starting at a firm in October. My current job doesn't have a 401k. Will the firm let me contribute the max between now and year's end?

Many (most?) employers have a waiting period ranging from three months to a year (most commonly six months) before you can contribute anything.

[TatteredDignity]

I'm starting at a firm in October. My current job doesn't have a 401k. Will the firm let me contribute the max between now and year's end?

Many (most?) employers have a waiting period ranging from three months to a year (most commonly six months) before you can contribute anything.

Well, that simplifies things.

[bk1]

I'm starting at a firm in October. My current job doesn't have a 401k. Will the firm let me contribute the max between now and year's end?

Many (most?) employers have a waiting period ranging from three months to a year (most commonly six months) before you can contribute anything.

Well, that simplifies things.

I think at least some firms count when you worked as summer (assuming you worked at the same firm before).

[thewaterlanding]

tag

[TatteredDignity]

I'm starting at a firm in October. My current job doesn't have a 401k. Will the firm let me contribute the max between now and year's end?

Many (most?) employers have a waiting period ranging from three months to a year (most commonly six months) before you can contribute anything.

Well, that simplifies things.

I think at least some firms count when you worked as summer (assuming you worked at the same firm before).

No such luck.

[pricon]

Great post. It is amazing to me how many people my age can't grasp the basic economic principles required to not end up on the street by age 60.

In the engineering world, I've got lots of old classmates who would have benefited greatly from knowing these things, so I imagine that would be equally true here.

Did you guys not cover this in a design class? In ChemE we did, in terms of business economics that equally applied to personal finance (ROI, inflation, etc.).

[Future Ex-Engineer]

Great post. It is amazing to me how many people my age can't grasp the basic economic principles required to not end up on the street by age 60.

In the engineering world, I've got lots of old classmates who would have benefited greatly from knowing these things, so I imagine that would be equally true here.

Did you guys not cover this in a design class? In ChemE we did, in terms of business economics that equally applied to personal finance (ROI, inflation, etc.).

Nope. Our curriculum (Electrical) didn't have any sort of business/economics. All of our offerings were very very technically focused.

[Wipfelder]

Great post. It is amazing to me how many people my age can't grasp the basic economic principles required to not end up on the street by age 60.

In the engineering world, I've got lots of old classmates who would have benefited greatly from knowing these things, so I imagine that would be equally true here.

Did you guys not cover this in a design class? In ChemE we did, in terms of business economics that equally applied to personal finance (ROI, inflation, etc.).

Nope. Our curriculum (Electrical) didn't have any sort of business/economics. All of our offerings were very very technically focused.

We, as Americans, are uniquely terrible at personal financial management. The worst.

[Anonymous User]

"5. Max IRA: This is tricky because of income levels and tax brackets. If you are in Big Law then skip to #6. If you make less than $71,000 then contribute the max ($5,500) to a traditional IRA. Traditional IRA is better than 401k because there are usually less admnistrative fees and you have a wider variety of funds from which to select.

There is a big debate about contributing to a Roth (post-tax) or Traditional IRA (pre-tax). Google "Roth vs. Traditional IRA" and read about it and select from your personal preferences. All I'll say is that I prefer pre-tax investing because I anticipate paying little to almost no taxes in retirement."

Good info in this post, but this quoted section should probably be edited. It is not true that people in Big Law should skip to #6. They should google "Backdoor Roth IRA" and max that in addition to the 401k (if they can). Then, consider googling "Mega Backdoor Roth IRA" and call their 401k provider to see if the plan qualifies (i.e. if it allows after-tax contributions and in-service distributions). There is the potential for enormous tax advantaged savings in biglaw, as high as about $58K / year (across 401k, Roth IRA, and Mega Backdoor Roth IRA). The Mega Backdoor Roth versus loan pay down becomes a tricky question (with different answers for different circumstances), but there are people in biglaw, saving for retirement in taxable accounts, with the ability to Mega Backdoor, who don't do it because they don't know they can. This knowledge is worth many thousands of dollars.

[kalvano]

I do a Backdoor Roth contribution every year. It's super easy and takes almost no extra time.

[kalvano]

Does anyone here use TD Ameritrade? Thinking about switching to them.

[Jchance]

Good info in this post, but this quoted section should probably be edited. It is not true that people in Big Law should skip to #6. They should google "Backdoor Roth IRA" and max that in addition to the 401k (if they can). Then, consider googling "Mega Backdoor Roth IRA" and call their 401k provider to see if the plan qualifies (i.e. if it allows after-tax contributions and in-service distributions). There is the potential for enormous tax advantaged savings in biglaw, as high as about $58K / year (across 401k, Roth IRA, and Mega Backdoor Roth IRA). The Mega Backdoor Roth versus loan pay down becomes a tricky question (with different answers for different circumstances), but there are people in biglaw, saving for retirement in taxable accounts, with the ability to Mega Backdoor, who don't do it because they don't know they can. This knowledge is worth many thousands of dollars.

Can we get a list of firm that actually allows Mega Backdoor Roth IRA?