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Wasn’t sure how to title my post but essentially, I have zero investments and now that I have fully subscribed to being a Boglehead, wanting to trust but verify my research with the crowd here, as I am ready to open a brokerage account.
I tried keeping this concise after having pored over multiple posts in the last few weeks but had a few questions of my own, so here I am. I love reading all this stuff about Bogling and looking to maximize my effort and knowledge.
TL;DR: Am I doing this right? Just open up a Fidelity account and do 60% VTI/30% VXUS/10% Target date fund and forget it? I would love to retire at 57, having 25 years of service with my firm, and then have enough money in my accounts to withdraw the 4% and “never really draw down my balance” thanks to the interest on my account. I figured $3.5m is enough to be able to do that.
I don’t know how to invest, am too scared of putting up my own cash in the stock market, but now I think it’s time.
I’ve never done this before. In fact, I didn’t start contributing to my 401(k) until I was 26. Currently, I have two methods of retirement savings. One is my 401(k) and the other is an ESOP through my employer. The ESOP is managed on behalf of the employees so I don’t need to do anything with it. Based on our company’s retirement calculator, and meeting with an independent advisor, they have projected that the total value of my 401(k)+ESOP will be around $3.5 million if I retire at 57, which is in 12 years. My employer plans make me feel very secure and I am ready to take the next step to expand my retirement portfolio.
I have a few questions for the crowd as I look to appropriately manage my money and plan for retirement at that age. Is retiring at 57 feasible based on my current retirement accounts and projections?
• I have been advised to take extra cash lying around, let’s say $15,000, and invest it on the open market. Is there any one platform that’s better than others? I was leaning towards Fidelity, but if Schwab is better, so be it. I’m looking for a good UI to navigate more than anything, and easy purchasing on the site type of stuff.
• Now that I have done some research on the Boglehead philosophy, I want to allocate the funds appropriately. Is putting 60% of it in VT or VTI, 30% in international (is that VXUS?) and then 10% in a target fund, let’s say 2040, the right move? Do I just do that in Fidelity and click “buy $6000 worth of VT”?
• I don’t quite understand compounding interest. I have been told that as of right now the value of my ESOP account being around $800,000, this will easily eclipse $3.5 million if I retire at 57, and that’s with a conservative estimate of around 5% ROI on the company stock, dividends and cash balance in the account. Is that real? It seems too good to be true, but every simulation I’ve had this calculator run seems to think so.
• I don’t have VTI/VXUS funds in my employer 401(k) so I did my best to mimic the investments. Currently invested in 60% US Equity Index J Fund, 25% BlackRock Mid Cap Equity Index M Fund, 10% Dodge & Cox International Stock X Fund, and 5% Vanguard Target Retirement 2040 Trust Fund. Is that a good mix? I was getting insane ROI on the US Equity fund last year (around 23% the latter half of the year), BlackRock was pretty good too. Overall I ended up with 9% ROI because my dumb ass transferred all my money in April because I panicked. I won’t do that anymore!
• I was advised to rebalance my 401(k) to 50/50 pretax/Roth, which is what I did. Currently, I contribute 8% of my salary and have $175k in my 401(k) all pretax at this point. Am I doing this right? Should I raise or lower it? My advisor said that it’s a good contribution but do the half Roth/pretax split.
Thank you for your advice.