Retirement?

guest769224 · Mar 21, 2016

Are travel nurses disadvantaged in this regard compared to staff nurses? I'll be interested to read the replies as I also plan to travel long term. What causes you to shy away from a financial advisor?

NedRN · Mar 21, 2016

A 401 is an option for you. Larger agencies offer them, and so do smaller agencies. I have twice in my life managed to get a smaller agency to allow me to contribute the annual maximum to a 401 in a single assignment. This makes for a really nice bump in your retirement accounts. The maximum elective contribution for 2016 is $18,000. Plus an employer can kick in more - usually it doesn't vest immediately (to encourage employee retention) so it is almost useless to travelers that use multiple agencies and it is small potatoes usually anyway compared to what you can elect to contribute.

This compares with the maximum contribution to an IRA which is only $5,500 this year. By the way, you can do both (without employer contribution) which gets you to $23,500 annually!!!! On top of that, you can invest more in a non-retirement account.

Of course, this depends on your lifestyle and motivation. But if you are working as a traveler full time, you can live reasonably (not in your car) and save this much and more a year.

By the way, I was close to 40 by the time I got out of nursing school and I'm comfortable now - I don't have to work. So you can do it!

E-trade is fine, although you will do better by using Vanguard or Fidelity directly for mutual funds. It is OK to buy small amounts of companies you like personally for fun, but only the very wealthy can successfully purchase enough different stocks to be safely diversified. Mutual funds (which may own a hundred different stocks or more) is where serious long term investors go, and ideally index funds. Index funds don't turn over stocks in their portfolio very often so the underlying fees for stock trades and management are very low, as little as 0.11 percent a year. This compares to managed stock funds with management fees of over 3% plus the cost of stock trades which can be a lot. The difference between managed and index funds (based on some index like the Fortune 500 - there are lots of indexes) over the 30 years you are looking at saving is huge, hundreds of thousands of dollars different just based on fees (including so-called "load" - you always want no-load funds). The difference in appreciation over that period of time is also huge - no managed fund has ever beaten an index fund over that period of time.

The experts say a certain percentage of your portfolio should be in bond funds, and you can even buy index funds that split the assets in the recommended percentage for your age without having to purchase bonds and stocks separately and rebalance them yourself (when one increases more than the other). But I'll leave that for you to read more.

You can diversify mutual funds too (although they are already diversified). You can buy a tech fund, an energy fund, or a healthcare fund that invest just in those industries. You might be smart enough to see 5 or 10 year trends, for example you can note that India has been growing like gangbusters and it is going to continue and you can buy a fund indexed to that country's stock market.

So the caveat to agency 401 plans is that their underlying investments are crap. The funds are all effectively load funds and very expensive ones at that and even experts have a hard time telling what they really cost you over buying a similar no-load fund from Vanguard. My strategy to beat that is to put all the 401 contributions into a money market account. They don't go down or charge fees. As soon as I'm finished with an assignment, I request a "roll-over" into my personal IRA. This is a no fee, no tax consequence transaction. Then I invest in what I like inside my own IRA.

I might recommend skimming some book like investing for dummies, motivational books like Ramsey are good to get you fired up, but basic investing never changes. You may be overwhelmed from even this one post and it is not really hard, but like anything it requires a bit of repetition to learn about something new. It is worth it, follow some simple rules and even more importantly develop disciplined saving habits and 30 years from now, your retirement plan will be worth millions. I'm serious. Break discipline only for buying a house or sending your kids to college (and you can make good plans for that too).

I haven't read Ramsey, however the decision to go for a Roth IRA or regular tax deferred IRA cannot be boiled down to one sentence. In a year with high annual earnings, a tax deferred IRA is the best choice. Most 401s will be tax deferred anyway and since you can contribute more to one anyway, you will end up with a regular IRA anyway if you follow my advice. Read more about the differences. I have both kinds, and in low earning years, I actually convert regular IRAs to Roth IRAs at much less than I would be taxed after retirement. If you think about earning over 92K a year, your last dollar earned will have federal income tax of 28%. That's a lot (although with payroll taxes I know your paystub looks like you are paying even more)! Wouldn't you rather defer the federal (and state usually) tax until you retire and have a much lower income taxed at a lower rate? That is free money, and it also is sitting in your retirement account growing the total faster.

So it is not as simple as Ramsey is making out, but Roth IRA's are great used properly.

NedRN · Mar 26, 2016

This article appeared in the NY Times today that should give you some pause about non-index fund investing:

Why We Think We're Better Investors Than We Are

By GARY BELSKY

Evidence shows that professional investors are no more likely to beat the market than monkeys throwing darts at stock listings. So why do so many amateurs think they can do it?

In addition to this article, for investing motivation, try reading the "The Millionaire Next Door". Ordinary people become millionaires by the time they retire and still live a good life.

Just.Blessed.RN, BSN, RN · Dec 18, 2016

BUMP for more replies!!! I love the 6% that my employer offers but I always think about the quick money of travel nursing...