First Years: how much cash have you saved over the past year? Forum

[Anonymous User]

I agree with that, but disagree about buying real estate. You never buy real estate hoping that your house will appreciate. Normally your house just appreciates with inflation. Sometimes people get lucky, but doesn't happen always. But if you buy it as an investment, i.e. buy it with an eye towards renting it out after you move or having a roommate pay part of your mortgage, I'd go real estate over stocks every day. I'm actually looking at buying my second property. I'm the poster from before who owns the duplex.

This was my idea when I bought as a first year. Got a 3 bedroom low maintenance (read no yard/land) that is close to downtown/in a desirable area. The idea is that when I move in 5+ years, I will rent it out and someone will pay my mortgage off for me (assuming rental rates don't fall dramatically and I can't cover my mortgage). Plus, the interest tax deduction is helpful. Then again, I am the poster with only 14k in the bank and 10k in 401(K) - so maybe I am not doing it right.

Im assuming you put something down on the house so its not like you only have 24k saved. Id count your equity as well.

I used pre-practicing $$/savings for the down pay (bought before I started at the firm). So while I count it for my net worth, I don't count it as saved from my first year salary.

This was a good idea, we should do this for third years as well. I am always interested to see if people start saving more as they stay longer and are more likely to be thinking about getting out? Saving in the first year is probably hardest because (1) you are probably relocating and buying furniture, a car, etc. and (2) you are making less/may be repaying a firm salary advance.

[Anonymous User]

If my firm does 401k contributions, would it still be a bad idea financially to not max my 401k, not contribute to a Roth IRA, and invest all that money into a low-risk investment portfolio? Mutual funds, bonds, some stocks. Not sure how I want to do it yet, but I would like to capitalize on compound interest and not have to wait until I'm 65 to cash in, and maybe also treat that portfolio as a retirement investment?

[bopqod]

If my firm does 401k contributions, would it still be a bad idea financially to not max my 401k, not contribute to a Roth IRA, and invest all that money into a low-risk investment portfolio? Mutual funds, bonds, some stocks. Not sure how I want to do it yet, but I would like to capitalize on compound interest and not have to wait until I'm 65 to cash in, and maybe also treat that portfolio as a retirement investment?

You can pull your contributions (but not the earnings) back out of a Roth IRA at any time without tax or penalty. If you're uncertain what you'll do with the money, the potential for tax-free appreciation to retirement plus the ability to use the principal (again, not earnings) if you need it makes the Roth IRA very versatile.

If you want to use the contributions in 20 years, they will only be worth ~1/2 as much due to inflation, so the question is whether you'll need both the contributions and earnings before you're 59 1/2. If the answer is an unqualified yes, don't do the Roth.

[bk1]

If my firm does 401k contributions, would it still be a bad idea financially to not max my 401k, not contribute to a Roth IRA, and invest all that money into a low-risk investment portfolio? Mutual funds, bonds, some stocks. Not sure how I want to do it yet, but I would like to capitalize on compound interest and not have to wait until I'm 65 to cash in, and maybe also treat that portfolio as a retirement investment?

You can pull your contributions (but not the earnings) back out of a Roth IRA at any time without tax or penalty. If you're uncertain what you'll do with the money, the potential for tax-free appreciation to retirement plus the ability to use the principal (again, not earnings) if you need it makes the Roth IRA very versatile.

If you want to use the contributions in 20 years, they will only be worth ~1/2 as much due to inflation, so the question is whether you'll need both the contributions and earnings before you're 59 1/2. If the answer is an unqualified yes, don't do the Roth.

If the OP has to do a backdoor Roth due to income limits, withdrawal would be subject to the 5 year rule pertaining to nonqualified distributions.

@OP: The tax advantages of 401ks and IRAs make them generally better than non-tax advantaged accounts such as a regular brokerage account. Even if you intend to retire prior to 59.5, presumably you will also need money after 59.5, so it still makes sense to contribute to retirement accounts. To the extent your employer does a match, you should always take as much of that as you can since it is an instant return (subject to any vesting requirements) on your investment.

[Anonymous User]

Balance Sep 2015
$1k Checking-1
$8k Checking-2
$0 Savings
$6k Roth IRA

$15k total

Balance Sep 2016
$6k Checking-1
$15k Checking-2
$21k Savings
$18k Roth IRA

$60k total (but includes some gains in Roth that are not accessible, plus $5.5k 2016 contribution/conversion that is inaccessible for 5 years)

Did not include 401k since OP specifically excluded, but I put $1.5k/mo into it.

Didn't expect to save any more or less.