OT: What to do with my money? Stocks, IRA's, Fish tanks?
- Thread starter Kinetic
- Start date
mcurl98
Premium Member
That's what I do. The majority of the rest goes into mutuals for me. As much as I'd like to think I can pick the winning stocks on a consistent basis, my mutuals always beat my picks over time. Most all brokerage houses (I use Etrade) have all the stats on the various mutuals. While apparently not a perfect indicator, I rely on their past performance and historical returns in choosing my funds. Has worked well thus far.
Vincerama2
Active member
If you want to wait for the stock market to go down, just tell me and I'll invest some money into...historically that has always been a sure fire way to destroy value in something. For instance, I bought a house and caused the market to crash. Need some rain for your drought laden country? Let me book a vacation there. Hate any particular company? Let me get a job there. Wanna short some stock? Let me buy some of it.
Worst thing you can do with your money is let it sit in a BofA bank account ... at what? half of a percent interest? The best liquid deal is to put it into an ING Orange saving acount at about 4+ %
Alternatively, go on vacation, or buy an iPod or take your S/O to a nice restaurant! ie; enjoy SOME of it!
V
Worst thing you can do with your money is let it sit in a BofA bank account ... at what? half of a percent interest? The best liquid deal is to put it into an ING Orange saving acount at about 4+ %
Alternatively, go on vacation, or buy an iPod or take your S/O to a nice restaurant! ie; enjoy SOME of it!
V
Psionicdragon
New member
Ya it is marginal.
seminolecpa
Premium Member
Here would be my suggestion. Though I am a tax accountant please by no means consider this tax advice.
1) Max out your 401K. This is by far your best option. #1 you get a decent return on your investment pretty much the same you could directly investing (unless of course you strike lightning in a bottle or are seriously limited by the # of choices in which to invest). Simple math will get you to the following
Assuming a 20-28% federal tax bracket and a 8% California tax bracket (assuming without actually seeing your return), you essentially get a roughly 30-35% deferral and thus put those dollars to work for you immediately rather then using post tax dollars to do it. Thus every dollar contributed cost you only about 65-70 cents but grows at the full amount.
The idea of the deferral is that you will be in a lower marginal tax bracket when you retire and draw on the account.
Most 401K plans allow you to borrow up to 50% of the amount should you need it at some point in the future and basically pay yourself the interest.
Here is an example of the loan concept in a very simplistic model (realize there are some other more complicated tax computations that go into it).
You decide in 5 years to buy a house and need money to keep you from having to do a second mortgage at say 8%. You borrow against your 401K to help fund your second mortgage and instead of paying the 8% (or whatever the current rate is) You pay yourself the interest. There are some tax benefits you lose but in my own case I did the analysis and I came out way better.
2) Disposable cash after maxing your 401K should be put into a high interest savings account (say something like ING which is federally insured). I would suggest about 2-3 months of living expenses in case something happens in your work life. I like to call this the FU fund.
3) Invest in the market, real estate or some kind of a mutual fund that has a high Morningstar rating.
Again this is a very simplistic example (without many other details) and I am no investment advisor by any means but it gives you a good idea of the options. Remember the market is very cyclical and waiting for a downturn is not smart investing as over the long term it will even itself out and could cost you money.
1) Max out your 401K. This is by far your best option. #1 you get a decent return on your investment pretty much the same you could directly investing (unless of course you strike lightning in a bottle or are seriously limited by the # of choices in which to invest). Simple math will get you to the following
Assuming a 20-28% federal tax bracket and a 8% California tax bracket (assuming without actually seeing your return), you essentially get a roughly 30-35% deferral and thus put those dollars to work for you immediately rather then using post tax dollars to do it. Thus every dollar contributed cost you only about 65-70 cents but grows at the full amount.
The idea of the deferral is that you will be in a lower marginal tax bracket when you retire and draw on the account.
Most 401K plans allow you to borrow up to 50% of the amount should you need it at some point in the future and basically pay yourself the interest.
Here is an example of the loan concept in a very simplistic model (realize there are some other more complicated tax computations that go into it).
You decide in 5 years to buy a house and need money to keep you from having to do a second mortgage at say 8%. You borrow against your 401K to help fund your second mortgage and instead of paying the 8% (or whatever the current rate is) You pay yourself the interest. There are some tax benefits you lose but in my own case I did the analysis and I came out way better.
2) Disposable cash after maxing your 401K should be put into a high interest savings account (say something like ING which is federally insured). I would suggest about 2-3 months of living expenses in case something happens in your work life. I like to call this the FU fund.
3) Invest in the market, real estate or some kind of a mutual fund that has a high Morningstar rating.
Again this is a very simplistic example (without many other details) and I am no investment advisor by any means but it gives you a good idea of the options. Remember the market is very cyclical and waiting for a downturn is not smart investing as over the long term it will even itself out and could cost you money.
Vincerama2
Active member
seminolecpa, when you borrow from your 401K, how much time do you have before you have to pay it back before you are nailed with a penalty?
I with your Max out 401K strategy. Particularly if your company matches part of your contribution ... free money!
Oh, if you contribute to a 401K, doesn't that limit your IRA options?
V
I with your Max out 401K strategy. Particularly if your company matches part of your contribution ... free money!
Oh, if you contribute to a 401K, doesn't that limit your IRA options?
V
dmirza
New member
I believe you have 5 years to pay it back. The dissadvantage of borrowing from your 401k is that you have to pay yourself interest (i.e. the interest goes into your 401k) but the interest payments are not tax deductable. In essance, all of the interest you pay will be taxed once when you earn it and once when you withdraw it from your 410k
Vincerama2
Active member
At what rate must you pay yourself? Is it based on prime rate or something?
Also ... if you don't pay yourself back, do you have to get your cousin Rocco to come over and break your kneecaps until you pay yourself back?
(maybe you can confiscate your own car as collateral! Ha ha!)
V
Also ... if you don't pay yourself back, do you have to get your cousin Rocco to come over and break your kneecaps until you pay yourself back?
(maybe you can confiscate your own car as collateral! Ha ha!)V
-=Zepplock=-
New member
mutual funds are a way to go!
especially for lazy people.
Go buy some greater China Funds for now.
Especially with S&P500 skyrocketing now, saving with 5% sound slike a joke.
especially for lazy people.
Go buy some greater China Funds for now.
Especially with S&P500 skyrocketing now, saving with 5% sound slike a joke.
seminolecpa
Premium Member
Each plan is different. Ask your plan administrator. For example both my plan and my wife's plan are through Fidelity (different employers) My rate is prime +1 her's is prime +4. She gets 20 years to pay it back if it is for a home purchase (10 I think if just a general loan). Mine caps out at 15 yrs but it can be for anything.
You don't get hit with a penalty if you pay it back according to the schedule. The only hitch is that if you leave your employer you usually have 90 days to pay back any 401K loans or it is treated as a distribution and then subject to the penalties etc.
Yes dmirza that is the more technical side of it. Essentially you are paying back the interest with post tax dollars and converting them into pre tax dollars. Still when you look at the rates on most 2nd mortgages you still come out ahead in most cases especially if the market is down.
You don't get hit with a penalty if you pay it back according to the schedule. The only hitch is that if you leave your employer you usually have 90 days to pay back any 401K loans or it is treated as a distribution and then subject to the penalties etc.
Yes dmirza that is the more technical side of it. Essentially you are paying back the interest with post tax dollars and converting them into pre tax dollars. Still when you look at the rates on most 2nd mortgages you still come out ahead in most cases especially if the market is down.
Vincerama2
Active member
"NOW" is the operative word...
V
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