If I work at a small company that does not offer 401(k), what is a good general approach to investing/retiring as a 25 year old?

Currently since I am not contributing to a 401k I make monthly contributions to a Roth IRA and student loans, but I wonder if down the road I should consider a taxable brokerage account (possibly Wealthfront or similar).

Asked by Warren

5 Answers

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Answered by Walter Ramos, Insurance Agent in san jose, CA
You have made the right decision on funding a Roth. however, consider contributing to an emergency fund in a Mutual Fund or Money Market account. Further, procure to begin funding to a 7702 (a) (Tax Free Retirement Income) for your future. This account needs to be structure properly to work adequately and according to your financial goals and objectives. it is the best plan I have seen in my experience as an advisor. Read the book "Tax Free Retirement" by Patrick Kelly. I hope this answers your question, feel free to contact me if you have any questions. | 01.26.15 @ 16:58
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 02:11
Answered by Phillip Christenson, CFA in Plymouth, MN
In general, invest for the long term meaning don't plan on touching any of the money for a long time. With that in mind ignore the up and down fluctuations of the market they will only distract you from your long term investing goals. Buy stock funds with low expense ratios that are highly diversified. DO NOT FUND a 7702 ACCOUNT. Shame on you Walter for recommending it. This is really just used to sell insurance, something you might not even need at your age. Remember Insurance are two separate things do not combine the two.

Beware of high pressure life insurance salespeople masquerading as financial advisors. And you should consider investing in your 401k before investing in a brokerage account. There is some great tax savings from doing so. | 07.28.15 @ 19:48
Comment 1  
Phillip Christenson, CFA in Plymouth, MN — My apologies I misread that you currently do not have access to a 401(k) through your employer. Then yes, after maxing out your Roth IRA you should look into an individual brokerage account. | 07.28.15 @ 20:02
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 02:11
Answered by Willard R. Brumbaugh, LUTCF in Victorville, CA
Walter need not feel shame for his recommendations. Properly funded Participating Whole Life and Equity Indexed Universal Life policies work well as tax-advantaged long-term accumulation strategies. These policies work as well as Roth IRAs for retirement income.

I do caution those who have read Patrick Kelly's book that his use of the term
Tax-Free is potentially hazardous. The income that comes as untaxed distributions can result in significant taxes if the policies expire before the insured. Had I titled his book I would have called it "Untaxed Income.' | 07.29.15 @ 03:07
Comment 1  
Saving in WI — Warren, insurance products are not investment strategies. Every financial planner will tell you not to participate in whole life products. Buy term life for what you need and invest like Mr. Christenson advises. | 08.10.16 @ 17:23
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 02:11
Answered by Phillip Christenson, CFA in Plymouth, MN
Please elaborate on how a whole life and equity indexed universal life policy would work as well as a Roth IRA for a 25 year old? Please show me the numbers.

| 07.29.15 @ 14:51
Comments 2  
Willard R. Brumbaugh, LUTCF in Victorville, CA — Assuming that the S&P 500 were to perform the same over the next 45 years as it did from 12/31/1999 to 12/31/2015, and that one contributed $5,500 per year to a Roth IRA, he would have $485,644 at age 70. A current projection of a participating whole life policy with an initial Face Amount of $425,000, assuming the same annual contribution shows a projected accumulation value of over $800,000 at age 70, with a Death Benefit of over $1,400,000. I have been in this profession since 1968. The interest projections in these policies are the lowest they have been since I entered the business. One could conclude that in the future actual rates of interest, just as with stock market performance, could be higher that they are today. As for Equity Indexed ULs, assuming the same inputs, these also would compare favorable to the Roth IRAs. | 08.10.16 @ 17:25
Saving in WI — Willard, In your example, if this person were to die, his wife would get the death benefit and the cash value right? So she would would end up with $2.2 million? | 10.27.16 @ 15:00
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 02:11
Answered by Dave Bradley, Investment Manager (Financial Advisor) in North Charleston, SC
Hi Warren,

If you are considering a taxable account due to maximizing your ROTH IRA, why not set up a self directed ROTH 401(k) with an employer match. In 2015, the contributions are the smaller of $18,000 or 100% of participants taxable income + $6,000 if over 50.. A Simple 401K is $12000 + $2,500 if over 50.
https://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-401k-and-Profit-Sharing-Plan-Contribution-Limits

Also, grow your retirement plan at your MARR- Minimum Acceptable Rate of Return or higher. We can help you determine this. Just give us a call to discuss your situation in greater detail. No obligation. My job is to eliminate risk and demand your satisfaction. So, let's get you where you need to be and keep you there.

It's not what you make, It;s what you keep that determines your lifestyle
| 04.08.16 @ 21:19
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 02:11
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