Updates

Thought I’d share some updates on some decisions I’ve made that I pondered out loud with you all in some past posts.

Roth IRA Diversification (click here for original post): I’ve decided go with option 1 and wait until next year to diversify my Roth IRA. I decided upon this because I did not want to deplete my cash reserves because in the coming months you never know I might need to have an emergency FU fund. (Check out Single Guy Money and Single Ma for their take on FU funds)

New TV (click here for original post): For the time being I’ve decided to use Mr. Be-Mine’s TV. I’m going to wait a few months and get a good feel for my expenses after moving and recover financially from the move before adding the additional expense of a new TV. But, I’m definitely planning in indulging myself with a new LCD TV, the timing is that only thing I’m unsure of.

I think that’s about it for items to update you all on (other than work). If you think of anything else let me know and I’d be happy to share.

Roth IRA Update

After my wonderful banking experience on Monday I decided to tackle diversifying my Roth IRA today, which is one of my goals for this year. Haha…yeah – not such a great experience, not only did I not get the advice I needed to do what I wanted to do (which I can understand not getting my way) but more importantly I didn’t get very helpful, friendly or knowledgeable people. Usually I really like Vanguard, but then I guess I’ve never had to call their call center.

Currently my Roth IRA is invested only in an S&P 500 Fund. So in theory my Roth IRA is “diversified” in domestic stock but I’d like further diversity as in more than one fund. The one problem with diversifying my Roth is that there is a minimum initial investment per fund of $3,000, unless you invest in the Vanguard Star Fund (which after reviewing this fund, I’d rather stay all in the S&P 500). I only started my Roth in 2007 so there’s only slightly more than $4k in my account.

I contacted Vanguard and talked to several people trying to find some way around this $3,000 minimum, such as using automatic deposit (which I’m currently doing) or paying a small penalty or really any solution and I was told no and given probably the same pat response that’s given to everyone “The minimum investment amount for all funds is $3,000”. Well I’d already done my research before calling and that’s not the case, there is one fund, the Star Fund, that you can invest in with a minimum of $1,000. So I’m very disappointed that that wasn’t even offered to me, not that I’d use it, but at least to prove to me the person I was talking to was at least familiar with the products offered.

Since it appears I’m not going to have any luck getting around this $3,000 minimum rule I now have a decision to make. I need to decide if I’m going move this goal to next year after my Roth has increased or if I’m going to have to dip into my other savings to fully fund my Roth at once. If I do choose to dip into savings most likely it will be my house down payment savings as I don’t want to dip into my emergency fund and my regular savings for irregular expenses (ie car maintenance) is not sufficient to cover this expenditure.

Here’s the Pro’s and Con’s of each options

Option 1 – Move Diversification Goal to Next Year
Pro: It’s the easiest and simplest option and it does not require adjusting current allocation of savings.
Con: I would have to continue investing in the S&P Fund for this year and then sell a portion to invest in a different fund, which would go against my philosophy of buying and holding.

Options 2 – Fully Fund Roth IRA for the Year at One Time
To do this I would have to dip into my down payment savings and would pay back my down payment savings by the end of this year with what would have been my monthly Roth contributions.
Pro: This would allow me to diversity this quarter and would theoretically be investing when the market is low.
Con: Loose the interest I’m currently earning towards the down payment. Investing in one lump sum means I am no longer dollar cost averaging. On top of that I would no longer have the artificial smaller paychecks with savings automatically directed to Roth savings.

What do you all think? Which option should I choose?

Author's Note: 2/27/08 Trent over at the Simple Dollar Appears to be having the same issues with Vanguard's $3,000 minimum, thought you all might want to check out his post too.

Roth IRA

I am so proud of myself today, I finally opened a Roth IRA. I had been thinking about doing this for about 8 months, even have been saving for it but the idea of actually opening it and then choosing the mutual funds was so overwhelming to me. For some reason today it dawned on me that the end of the year is nearing and I realized if I didn't do it this week I wouldn't contribute for 2007 (yes I know I can contribute per the IRS rules until my tax bill is due - April 15). This realization propelled me to action and so I go online and you know what - it took no time. I probably spent all of 10 minutes on line and bamm I was done! It's amazing what you'll put off that really isn't a big deal.

In case you're curious about the Roth IRA, I opened it at Vanguard primarily because my company's 401k plan is with Vanguard and it make it easier on me to have it all in one location. I'm a firm believe that the key to success is to keep it simple. On top of keeping it "all in the family" I also opted for Vanguard because of their no load fees and no account management fees (provided you opt for the web based mailing in lieu of paper mailers) plus I like Vanguard's 500 Index Fund which is tied to the S&P 500. All in all in about 10 minutes worth of time I successfully completed a task I'd been putting off for months.