Book of the Week: The Bogleheads' Guide to Retirement Planning
04 Jan 2015
This week’s book is The Bogleheads’ Guide to Retirement Planning. I wanted to read something to help me retire. I found out about Bogleheads through the personal finance subreddit. I didn’t find the book that useful. For people getting into retirement planning, it is an okay introduction. I found it easier to read stuff online and read finance books like The Intelligent Investor and Unconventional Success. I’m more concerned with investing than retirement even thought I’m investing for retirement. The goal of investing for retirement is to avoid taxes (money to government) and expenses (money to brokers/managers). The earlier you start investing, the better. IRAs and 401ks have tax benefits. Tax benefits are good. What’s a Boglehead? The founder of the investment management company Vanguard is John C. Bogle. Bogleheads are his cult followers. Putting Money Toward Retirement
- Put money in 401k up to employer match. Free money.
- Pay off high interest debt. If you were smart, you wouldn’t have any.
- Put money in IRA. ROTH IRA if you think you are in low tax bracket now and will be in higher tax bracket in future. Tax-free money. More investment choices than 401(k).
- Emergency Fund. 6 months or however long it will take you to get income again.
- Max out 401k. More tax-free money.
- Normal taxable investment accounts. Ran out of tax-free places to put money.
- Other assets that generate cash flow
You should invest your money in low expense ratio index funds like those from Vanguard. It is hard to beat returns on index funds. Expense ratios are lower on index funds, so you keep more of your money. Index funds let you diversify easily. Index funds are boring, but hard to beat. There will be periods you will lose money. Stay the course. Disclosure The information does not constitute legal, tax or investment advice and I own Vanguard index funds. Although I don’t see how advertising them would benefit me financially.