Need advice on where to invest until we are eligible for company 401k.

[surf n turf]

The situation is that I just started a new job and am not eligible for the company 401k until Jan 2017. I started in Feb. and there is some rule that they don't admit new participants into the 401k until they have at least 6 months, but they don't add participants but every 6 months so my next opportunity is in Jan 2017. Also, my S.O. just started a new job and has the option for a SAR-SEP plan that she won't be eligible to participate in for 2 years.

Right now we have Roth IRAs and rollover TIRAs with Vanguard. We max out both our Roths and need to find a place to put a significant amount of money until we are eligible for our company plans. Should we just open up a non-qualifying account with Vanguard and start pouring money in there? Currently we have zero debt and paid off mortgage so we don't have any debt to pay off. We're going to have approximately $1200/mo to invest and we are looking for the best tax efficient mutual funds to invest in with good growth potential. We're looking for any advice anyone has on this subject. The money invested will be long term so I'm assuming I will not have to pay regular income tax on this investment. Timeline is 10-15 years before we draw. We're likely to stay with Vanguard. In retirement I'll have two small pensions and social security in addition to the Roths, TIRAs, and 401k. Is taxable account the obvious choice?

 

[LOL!]

Should we just open up a non-qualifying account with Vanguard and start pouring money in there? […]
Is taxable account the obvious choice?

Yes, a taxaxble account invested tax efficiently is the obvious choice.

Other choices might be 529 plans or HSAs if they make sense for your situations.

Tax-efficient Vanguard funds are the broad market index funds: Total Stock Market Index and Total International Stock Market Index. If you need fixed income funds, then put those in your rollover IRAs.

 

[pb4uski]

The situation is that I just started a new job and am not eligible for the company 401k until Jan 2017. I started in Feb. and there is some rule that they don't admit new participants into the 401k until they have at least 6 months, but they don't add participants but every 6 months so my next opportunity is in Jan 2017. Also, my S.O. just started a new job and has the option for a SAR-SEP plan that she won't be eligible to participate in for 2 years.

Right now we have Roth IRAs and rollover TIRAs with Vanguard. We max out both our Roths and need to find a place to put a significant amount of money until we are eligible for our company plans. Should we just open up a non-qualifying account with Vanguard and start pouring money in there? Currently we have zero debt and paid off mortgage so we don't have any debt to pay off. We're going to have approximately $1200/mo to invest and we are looking for the best tax efficient mutual funds to invest in with good growth potential. We're looking for any advice anyone has on this subject. The money invested will be long term so I'm assuming I will not have to pay regular income tax on this investment. Timeline is 10-15 years before we draw. We're likely to stay with Vanguard. In retirement I'll have two small pensions and social security in addition to the Roths, TIRAs, and 401k. Is taxable account the obvious choice?

Yes, taxable investing is your best bet to me unless you qualify for a HSA. I would go all equities in the taxable accounts so dividends and LTCG will get preferential tax rates (0% if your total income is in the 15% tax bracket or lower, or generally 15% if your total income exceeds the 15% tax bracket).

 

[surf n turf]

Thank you both for the quick replies. I'm relatively new to this and have just recently gone out on my own(recently left Ameriprise). It's been a little bit of a learning curve for me but I'm finally figuring out a simple and solid investment strategy for us. I'd like to get past the "knows just enough to be dangerous" phase of my knowledge. I've been lurking on here for years. It's been a wealth of information and help. I can't rely on anyone else in my life to get specific and straight advice on these issues. I'm looking forward to learning as much as my brain can handle and hopefully can FIRE by 55 like I've been planning on.

 

[Animorph]

If you're not maxing out your 401k in the future you might consider stashing what you would otherwise be putting in the 401k now into an online savings account. Then max out your 401k contributions in 2017 and beyond, using the online savings to pay expenses until it runs out.

Or invest in whatever at Vanguard and sell it as needed to fund extra 401k contributions in 2017 and beyond. That's just a little harder than keeping it in cash, gets you invested now, and gets it into the 401k when you can.

If you will be contributing the 401k max anyway, and a Roth IRA is maxed or doesn't make sense, then yes, a taxable account may be your only choice.

 

[EastWest Gal]

Taxable account is fine, and critical to ER. 2/3 of my investments are in taxable account. Index funds-high percent in equities, then buy into lower volatility bonds and cash as you get older. As much in ROTH as you can but make sure you don't go over the limit based on income.

Bogleheads forum can give you very direct advice in this regard.


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[DrRoy]

It would be good to have a taxable account with index ETF's. Depending on your age at RE, you would need some non-retirement sheltered funds to live on until you can tap the IRA's and 401K's.

 

[surf n turf]

If you're not maxing out your 401k in the future you might consider stashing what you would otherwise be putting in the 401k now into an online savings account. Then max out your 401k contributions in 2017 and beyond, using the online savings to pay expenses until it runs out.

Or invest in whatever at Vanguard and sell it as needed to fund extra 401k contributions in 2017 and beyond. That's just a little harder than keeping it in cash, gets you invested now, and gets it into the 401k when you can.

If you will be contributing the 401k max anyway, and a Roth IRA is maxed or doesn't make sense, then yes, a taxable account may be your only choice.

Yes, this is what we are considering. We will probably do a combination of the two so we can get some taxable investments into the portfolio to help when we're "bridging the gap" as well as tax offset once we start drawing. I'm not exactly sure what my pension will be for the new job but I've got some exact numbers for the previous job but will not be able to tap into the full amount until age 62, assuming it's still there by then. If we end up with the largest portion in 401k then we'll consider 72t to help with expenses since SS and pension will both kick in at 62. Planning on saving the Roth money for that time. Maybe there is a better solution?

 

[surf n turf]

Taxable account is fine, and critical to ER. 2/3 of my investments are in taxable account. Index funds-high percent in equities, then buy into lower volatility bonds and cash as you get older. As much in ROTH as you can but make sure you don't go over the limit based on income.

Bogleheads forum can give you very direct advice in this regard.


Sent from my iPhone using Early Retirement Forum

Currently lurking on Bogleheads forum and absorbing as much as possible. Most of our current portfolio is bogleheads inspired with a large amount in Total Stock, Total Intl, and Total Bond all in Admiral Shares with some Wellington Admiral and LifeStrategy Growth thrown into the mix for added simplicity. If my new 401k is littered with front load funds and high expense ratios, would it be better to just invest up to the match and then put the rest in taxable or would it still be wise to dump as much as possible in the 401k?