We are 25 and 26, respectively. Over the past two years, my wife and I have finally gotten our finances in order:

-We cleaned up our credit
-Bought a house we can afford 103k house, 60k combined income. 5.75% interest rate, which makes our payment $916/mo, including PMI, Taxes, and Insurance.
-Built an emergency savings account to $10k that currently gets around 2% APY (It was higher about 6 months ago), but we want it liquid.
-Have old 401k with about $11k from my wife's former employer.
-No debt, other than the mortgage

We put retirement saving aside to get our emergency fund up to $10k. Now that we have done that, we would like to rollover her 401k into a Roth IRA and start putting as much as we can back. We plan on "paying" our retirement like a bill, every month and adjusting our budget for it. For now, we plan on putting about $200 a month into the account as a standard payment. My pay varies, and I plan on putting more money in when I can.

So here are my quesitons:

Since we are 30 years away from retirement, I know we can be more aggressive with our portfolio. What would be a good division of how we use our IRA to invest? Is there a tool somewhere that can help me decide what percentage I should invest in what?

What options are there for a Roth IRA, as far as investment choices?

I am thinking I want around 50% of it in something relatively safe, 25% in a medium risk venture, and another 25% in stocks or something along those lines, but I really have no idea.

Any links to point me in the right direction will be very much appreciated! Thanks in advance!

My question back to you is...why not invest in both? It benefits you with retirement being so far off in your future, who knows the tax effects will be, so I would keep more than one vehicle driving $$$ for me while I spread out the type of funds I contain within each.

401k, pretax, max 15.5k/yr
Roth, aftertax, max 5k/yr

She no longer works for the company that has the 401k, so we cannot contribute anymore. They just now released it to us so that we can roll it over.

Congrats on a great beginning!

Apologies this is going to be somewhat blunt/quick, I don't have much time but some things you do now, can/will have amazingly wonderful ramifications in the future:

200/mo for retirement is too low (particularly when it's two of you), especially with such wisely appropriate housing costs. As close as you can get to the max contributions, the better off you'll be. Do some compounding calculations to show how awesome this can be for those beginning in their mid-20s.

Roth IRAs are awesome-- keep in mind when you roll over a 401k into a Roth IRA, it's taxable income (I would still do it)

Keep in mind Roth IRAs can be a secondary/tertiary "emerg funds" since you can pull out any contributions without taxes or penalties
(tho this really should not be done with rare exception). Roth IRAs are a type of account, developed for its awesome tax benefits. Within this account, you can have individual stocks, mutual funds, etc, etc.

Fight for returns on your cash emergency fund (there are a number of high yield savings accounts with no min bal, no fees, linked to your
checking acct that earn at least 50% more than your 2%, tho the yields are still relatively low)

You may want to have an investment account(s) outside of your retirement accts. Most people should, but I can't go into all of the caveats and what to do firsts, and individual circumstances. Just keep it in mind, perhaps for the future.

I think you should be more aggressive with your long-term retirement funds; as long as you cannot fathom using the money in the next 5 years minimum
(and your invest timeframe is really 30++ years-- remember some of your funds will still be invested after you retire). If it were me, with this 20-30-40
year money, I'd be invested 100% in stocks/stock mutual funds/stock index funds with very low fees, especially after the market was down 35-40% last year. These would include diversification with regard to sectors, size of companies, and us/int'l. Learn more about this. Also "dollar cost averaging" future money put in.

I would read some books on investing: Peter Lynch (One up on Wall St and Beating the Street), John Bogle. Check out vanguard dot com, including their low-cost index mutual funds. You really must pay attention to fees/costs and stay away from the crooks. And just b/c they are from a big firm, that you've heard of and in the financial press, doesn't mean they are not crooks. Vanguard is one of the most ethical invest firms in the world (I don't work for them, they are actually competition-- but not really, as we all benefit from honest/ethical companies in the investment world). Learn a lot and aim high. You two can have profoundly successful investment funds.

It's hard to communicate how amazing a number of the right steps taken now (or soon really-- like in the next year, don't have to rush and make errors by rushing) can be for your futures. Many, many applause to both of you!

Mojo, you cannot rollover 401k funds into a Roth IRA, unless it was a "Roth 401k", which it probably wasn't (unless you know otherwise). The two account types have different tax treatments.

You would rollover the 401k into a traditional IRA. From that point you could convert the traditional IRA into a Roth IRA, and in so doing incur an income tax liability on the amount converted. But I wouldn't even bother. Because ultimately you should probably have both account types going (Roth style taxation and traditional style taxation), and you should probably keep a traditional IRA throughout life in order to rollover work-related retirement accounts into it when you switch jobs. So I'd just leave it as is and separately open up a new Roth IRA when you can afford to.

As for allocation, I'd encourage you at your age to be much more aggressive that you suggest. Might be able to come back later with some comments.

Sorry, reading is fundamental and I missed that detail.

Well make it a goal for you to have both types of accounts (IRA & 401k) in your financial portfolio as it becomes possible. You must roll over the funds for now so the IRA is the way to go, and it if you are not investment savvy, stick to indexes & mutual funds--they diversify the holdings for you.

I also recommend Vangard.com, the fees are low if any at all and the web interface is super easy to use. The account will grow with you cause Vanguard has all types of vehicles in which to store your money & can be managed on a single screen.

Thanks for all of the great information. To tackle a couple of points:

1. $200/month will be the base that we will pay every month. I plan on trying to put extra when I get extra to get the max contribution.

2. The days of the 4%APY are gone. The best I have found is the 3.44 from Dollar and I plan on moving it there once I put a piece of my tax refund into the savings account.

3. Thanks for the heads up on the Roth/Traditional IRA and rollover. I will probably do as you guys suggested and just rollover the 401k into the IRA and open a new Roth IRA. I saw T. Rowe Price has some nice no load mutual funds that can be put into an IRA account. I will check out Vangard, too.

4. What are some less volatile investment vehicles? Bonds? I want at least a small portion to sit in something relatively safe, so my wife doesn't freak out. She hasn't quite grasped the concept of long term investment. I want to buy stocks and mutual funds now, while they are on sale. I tried using an analogy of clothes being on sale at the mall to explain the situation with the stock market now. I think she is finally starting to get it.

No advice on your investments..just wanted to say congrats for getting a grip on your finances at your age.

If you really want some stability, about the best advice to give is to use 1) money market accounts, 2) bank accounts, and 3) SHORT term government bonds. And none of those are paying much interest now. Fact is, there just about aren't any good investments that are non-volatile. Traditional advice says that bonds are safer and less volatile, but they've been rocked like everything else over the past 6 months. U.S. Government bonds have gone up in value (and conversely are yielding less interest) -- however, if the economy becomes healthier and interest rates rise to more normal levels, that's when government bonds would lose lots of value.

(Keep in mind for bonds that pay a stated amount of interest, the market value of the bond moves inverse to the market interest rate yield.).

But consider this: you are not limited to one IRA account -- you can have as many as you want. Think of your IRA money as one portfolio of money that may be divided up among multiple accounts. You could look for the best bank CD you can find and open that as an IRA account. Put a chunk of your money there, and that can be the safe and nonvolatile part of your IRA portfolio.

Exactly!!!!

OP, congrats!!!