Investments after the maxed 401ks and IRA's

[Warthog]

Howdy all, I just found these boards and haven't spent a lot of time looking around yet. So I appologise in advance if this is a redundant question.

In 2007 my wife and I are looking at an increase in our annual income of about 45k. I got a big fat raise at my current job (promotion) and she got a big fat raise by switching jobs.

I was already maxed on my 401k, I actually had to cut back on the percentage. My wife will max her's out and still 'take home' more than she was before. Both our IRA's have been fully funded in the budget for some time.

We have three investment properties, one of which we plan to sell in the next year or so. That should wipe-out all of our debt (including our primary mortgage). We do plan to remodel our primary residence, which may bring on some more debt, but we should be able to pay it off quickly. Our house is a '70's brick rancher, with at set of '70's bathrooms and kitchen

Thus, once the dust settles, we're looking at a couple thousand dollars a month with nothing to do. We are already highly invested in stocks both in and out of tax advantaged accounts. I don't really want anymore exposure to realestate. Thus, I'm thinking municipal bonds for their tax advantages and because we're about ten years for where we want to be in terms of our $$ goal, so I need to start getting more conservative.

Suggestions would be greatly appreciated. Perhaps a book?

Thanks,

-Warthog

[Helen]

Hi Warthog,

I am putting my after tax dollars in I Bonds. I live in Oregon and we have about a 9% state income tax. I plan to use this money to fund my partner's and my first four years of retirement, so we want something safe. We won't pay any interest on the I bonds until we cash them in at retirement and they will be exempt from State taxes.

Just an idea, but I'm sure others will have more.

-helen

[F M All]

Hi Warthog,

Is your partner Pressed Rat by any chance?

[HFWR]

And do you have a collection of dogs' legs and feet? :P

Bonds, commodities...?

[maddythebeagle]

Quote:

Our house is a '70's brick rancher, with at set of '70's bathrooms and kitchen

I would wait, avacoda and orange might come back in to style I think dividend paying stocks and index funds make a good place in a taxable account....

[Warthog]

Quote:

Originally Posted by F M All Hi Warthog, Is your partner Pressed Rat by any chance?

Heh, I probably have that on a CD somewhere (huge Clapton fan), but alas, no...

'Warthog' comes from my favorite airplane, the A-10 Thunderbolt II, aka the Warthog

I currently buy a fair amount of EE and I bonds to finance the third tier of my emergency fund (local savings account -> ING -> Savings Bonds). I may step that up a bit in the interum as I'd like to finish my master's degree in the next couple of years (before FIRE while my employer will pay for most of it).

[GOJAGATORS]

Warthog,

I'm in a similar situation and I use munis for a lot of my after tax investing since DW and I have the equity exposure we want in our pre-tax accounts. I buy individual bonds and not funds and buy a lot of zero coupon munis targeted at the first few years we will be FIREd. You can generally get 20-25 basis points more yield with the zeros, however, they will be VERY volitile if you have to sell before maturity. Since I am buying every month or so I'm not really worried about having the coupon income to reinvest as time goes by, and I just buy the best value I can find at the time I have the money.

As for bond books, "The Bond Book" by Annette Thau or Marilyn Cohen's "The Bond Bible" are pretty good primers on buying bonds.

[lswswein]

I have a simple suggestion: How about you look at your total portfolio instead of as tax-deffered and after-tax.

You can then add the bonds to your 401k and then add equities - indexed preferably to you after tax. This would be really simple if you add something like a TIPS fund or Treasury Fund to your 401k and a Total Stock Mkt fund to after tax - This would be very tax efficient and you would not sacrifice much performance.

-h

[MooreBonds]

Quote:

Originally Posted by Warthog I was already maxed on my 401k, I actually had to cut back on the percentage. My wife will max her's out and still 'take home' more than she was before. Both our IRA's have been fully funded in the budget for some time. Suggestions would be greatly appreciated. Perhaps a book?

What tax bracket will you be in? What's your state/local income tax rates?

I bonds could be okay, although the current fixed rate is pretty paltry - if you're looking at I-bonds, I'd recommend thinking about ISM, given the current real return compared to I-bonds and TIPS - but it might change given your specific local tax rates.

If you have line items for charities in your budget, I'd suggest either T Rowe Price/Fidelity/Vanguard for their "Donor-advised funds". You make a lump-sum contribution in the present year, get the tax deduction for the full contribution, then manage the money and gift it to charities as slowly (5% minimum per year) or as quickly as you wish. Since your brackets will be higher in the next 10 years compared to retirement, might make sense to use the DAFs.

If not, another option could be simply putting it in Wellesley. Could do a lot worse than that.