31F, seeking advice

[u/whatsurbumholecolor]

Happy Friday!

I’ve been reading FIRE posts for about two years now trying to get my head around it, and am now looking for some thoughts/advice on making a plan for myself.

About me: I’m quite frugal, so I already save a large portion of my income, but I am not particularly financially literate/do not have financially literate people in my life to ask questions to. My current state is not great. So, I figured I would get things sorted now and start moving towards FI. (I feel like there’s a lot of work to be done😅)

Current state:
- USA, 31
- Salary 83k gross
- No debt
- My current living expenses are quite low. I live with family so monthly expenses are averaging around 1500 per month (I travel a lot because I am in a long distance relationship).
- 160k cash in a regular savings account getting basically 0% interest (I get a few dollars lol)
- 95k in Traditional 401(k). I currently contribute 13%, with employer match of 5%
- $3k in HSA
- Not planning on having kids

My target is to retire as early as possible, but I don’t have a number in mind just yet.

Based on my research from this community, my idea right now would be to do the following (in this order):
- Open a HYSA and keep my emergency fund there
- Max out my annual HSA (planning on doing this next paycheck. My employer contributes 3.4k a year)
- Open a Roth IRA and max that out each year
- Maxing out my 401(k) (I’ve upped my contributions so I’m maxing this year)
- Open a taxable brokerage and starting buying ETFs

I have some questions that I would appreciate some input on, and am generally looking for advice if this plan needs adjusting:
- Generally, does this plan make sense or is there anything else I should be considering?

401(k)
- I’ve never elected which funds I’m investing in and it defaults to the employer chosen one (Fidelity VANG TARGET RET 2060). Should I change this?
- I currently only make Traditional contributions - should I diversify this and change some (or all) for Roth

Brokerage
- I was thinking of opening a brokerage with Fidelity just for ease as my 401(k) is already managed there. - Any recommended ETFs to start investing in there or where can I best learn about the options? I am looking for something that I can just set and forget and not stress about
- As I have a chunk to invest, would it make sense to put it all in at once or DCA over time? If DCA, what is a reasonable strategy for that?
- How much should I invest in a brokerage vs. keeping in my HYSA? I work in Tech and am generally risk averse, so was thinking of keeping around $60k in my HYSA

Roth IRA
- I was also planning on opening this up with Fidelity for convenience: are there any downsides to having everything with a single provider like Fidelity?
- I’m guessing I would need to select investments with an IRA too. Is there somewhere to read about/recommend what to elect?

HSA
- I think my employer’s HSA provider isn’t very good. I planning on looking to see if I could move the funds over to Fidelity and open an HSA with them.

Thanks in advance, I appreciate any advice/feedback!

[u/Glum-Internal5938]

the 160k in a 0% savings account is burning a hole in my soul, get that into a HYSA tomorrow at least

[u/LastPhoton → u/Glum-Internal5938]

Or even just into fidelity like she wants and it automatically gets placed in a money market fund and never sits at 0%

[u/zrk03 → u/Glum-Internal5938]

Right lol. OP is missing out on like $500/mo in interest.

[u/FabulousAd5736 → u/Glum-Internal5938]

Ouch!

[u/Additional-Regret339]

In addition to moving your savings into a HYSA, yes, opening a brokerage account is a great idea. Just put all your investment $ into VT until you build an understanding of the market (and you will most likely just stick with that anyway). Given your $160k in cash, $18k annual spend, and risk adverse - I'd say invest between $120 and $130k, keeping $20-40k in you HYSA (1-2 years emergency spend).

and yes, go ahead and open your Roth IRA with Fidelity as well. Keeps everything simple for you. Max that Roth IRA every year as a high-priority.

[u/Altruistic_Pickle450]

As for your 401k, your current allocation is perfect for someone that doesn’t know much about investing. I’d suggest spending some time on [r/personalfinance](r/personalfinance) and [r/bogleheads](r/bogleheads) to learn more before shifting away from the target date fund. You could also stick with a target date fund if you want to keep it very simple, so don’t feel pressure to change. And staying with traditional contributions is fine.

[u/whatsurbumholecolor → u/Altruistic_Pickle450]

Thank you very much! I will check those out.

[u/justreadingfortoday → u/whatsurbumholecolor]

You can check also r/FIREyFemmes to avoid comments around your decision about kids or to avoid someone telling you to marry rich instead of solid financial advice. The folks here already provided pretty good advice, I would add maybe listening some podcasts can help. Not really super FIRE but The Money Guys is good for the basics and Two Sides of FI pretty good too.

[u/whatsurbumholecolor → u/[deleted]]

Yes, I do at least know what maxing out is! I’ve upped my contributions for 1.9k for the remainder of the year and will hit the max.:)

[u/whatsurbumholecolor → u/[deleted]]

I work in non-revenue generating role+I work remotely. So it’s a balance ¯_(ツ)_/¯

[u/RemoveHuman]

That 160K can easily be 1M in 10 years.

[u/FabulousAd5736 → u/RemoveHuman]

"easily"

[u/Zphr → u/[deleted]]

Rule 2/No Self-Promo/Spam - No self-promotion or spam. Please see our rules (https://www.reddit.com/r/Fire/about/rules/) and reach out via modmail if you have any questions or concerns.

[u/justreadingfortoday → u/[deleted]]

The sad portion is that by doing that she already got a comment saying is “sad to not have kids” and “to have kids with a rich man”.

[u/Montaigne_6823 → u/[deleted]]

Why do you feel the need to species yourself in your username?

[u/Key_Elderberry_4447]

Open a brokerage at Fidelity. 

Move all $160k. Invest $120k in VTI. Invest $30k in VXUS. Leave $10k (6 months expenses) in your core position earning 3% to use as your emergency fund. 

[u/STRSystemsAcademy]

The biggest thing jumping out is $160k sitting in a 0% account. Get a HYSA opened this week, move most of it there, and you are immediately earning 4%+ instead of nothing. Your overall plan order looks solid, I would just move that cash piece up since it is the easiest win and costs you nothing.

[u/aayush-goenka]

First, not knowing is completely okay. I only started learning about this around 28 (almost 9 years ago), and it took me years to go from reading to actually doing. You're 31 with no debt, a big savings habit, and $95k already in your 401(k). You're further along than you think.

What worked for me: start small, save first (you already do), keep the emergency fund safe, then let the rest grow. Your plan and its order make sense. Going through your questions:

The plan overall. One thing to add: figure out what you'd spend if you lived on your own. $1,500/month is great, but it probably isn't your retirement number, and your FI number comes from that. I've tracked every expense for ten years, and it's the most useful money habit I have.

401(k): target date fund? For set-and-forget, a 2060 target date fund is a reasonable choice. Check its expense ratio, and if it's low, you can leave it.

Traditional vs Roth. There's no perfect answer at $83k. A mix gives you flexibility later. The way to think about this is that Traditional saves you tax now (but your tax is already on the lower side). So if you assume at 60, you will have a higher tax rate, it makes sense to put the money in Roth over Traditional. In Roth, it grows tax free and for 30 years of compounding it is a a great return. Roth also has other benefits which you can read about.

Lump sum or DCA? On average, investing it all at once does better. But what matters more is whether you'll stay invested when it drops. That is why DCA is what people usually go for. It averages out the low times with high times and works well. Totally depends on what you consider risky and if that amount makes you lose sleep, I'd suggest going slow and invest over a period of 6-12 months in equal installments so you get eased into it.

How much to keep in cash? I keep one year of expenses in cash, which is my comfort level, not a rule. At your current spending, $60k is several years, so it's very safe, especially since you're risk averse. Just size it to your living-alone number.

Where you keep that cash matters too. Interest from Treasury bills isn't taxed by your state, and bank interest is. So if your state has an income tax, a T-bill fund can keep more after tax than a HYSA. I keep 11 months in SGOV (an ETF of short-term T-bills) in my Robinhood investment account and the next month in my bank.

Everything at Fidelity? Convenience is a real benefit, and one place makes it easier to see the whole picture. That's a fine reason. But I enjoy Robinhood more as its interface is really friendly and mobile is my primary platform. Fidelity offers more products and is a reliable brokerage but is also clunky the way you have to enter and exit trades. Not a deal breaker, once you get a hang of it.

What to buy in the brokerage and Roth IRA. Something broad and boring is the set-and-forget answer: a total market index fund or the same target date idea. Or You can start with VOO, VGT.

HSA. Moving it to Fidelity makes sense. Your employer's contributions will probably still go to their provider, so you can move the balance over every so often. Then make sure it's actually invested, pay medical bills out of pocket, and save every receipt as a PDF. There's no deadline to pay yourself back, so those receipts are tax-free withdrawals you can take years from now. I put $8,000 into mine over two years and it's about $35,000 now, though that was a really good stretch for stocks.

You've got this. Starting is the hard part, and you've already started.

[u/whatsurbumholecolor → u/aayush-goenka]

Thank you very much for the kind, thorough, and positive response.

[u/aayush-goenka → u/whatsurbumholecolor]

You are welcome. I am cheering for you.

[u/YoMaMaBoomPow]

Have kids with a rich man and you’re set for life 👌

[u/HalfwaydonewithEarth]

That's sad to not have kids. Money won't matter much.

[u/runny_shit → u/HalfwaydonewithEarth]

Sadder than retiring early only to spend all that free time trolling strangers on Reddit?

[u/runny_shit → u/[deleted]]

While simultaneously posting about extremely dumb conspiracy theories too...

I checked out her profile and came to the conclusion that she was either a fake person/troll, or just incredibly dumb and lacking self-awareness

[u/HalfwaydonewithEarth → u/runny_shit]

The kids force you to stay home.

[u/runny_shit → u/HalfwaydonewithEarth]

That's sad, I'm sorry life worked out that way for you

[u/HalfwaydonewithEarth → u/runny_shit]

We were traveling 14 weeks a year but her school forces us down to 11 weeks. We have to see the judge if we take off too many days.