where to invest once retirement is maxed out?

[SingleMomDreamer]

I'm 43. My retirement accounts should hit $250k by the end of the year. I plan to continue contributions for the next 7 years, but even at $250k, assuming 10% annual rate of return (aggressive portfolio) and with no further contributions, the time-life calculations put me at $2 million by the age of 65. That's plenty for me as I'm a cheapskate at heart.

I have 11 years left of paying for my house (4.25% interest rate). I just started a small business on the side, which I'm hoping will eventually net $25-$50k annually in a few years. I've been able to fund that investment from cash until this last week when I finally had to tap into the $5k line of credit. But the "big bleed" for the business is over and I hope to see some positive cashflow coming my way in a few months.

I now need to build a portfolio outside of my retirement. I have some individual stocks and seem to have a knack selecting the right stocks at the right time (most of the time), but I'll need to find some less-risky options. What advice do you have in regard to where to put away the pre-tirement income?

Oh, the side business is a small publishing company (just my own books at the moment). I'd like to retire from my regular job at age 50 and sustain the publishing company as a means to exercise my brain and bring in some income. Besides, it's rather fun.

Any thoughts?

Thanks,
Brenda

 

[Peaceful_Warrior]

You can go with some low-expense Mutual Funds if you want to get started on the taxable side.

I basically asked a similar question a while back and ended up investing in a Vanguard Total Stock Index fund.

 

[Rich_by_the_Bay]

I'd like to retire from my regular job at age 50 and sustain the publishing company as a means to exercise my brain and bring in some income. Besides, it's rather fun.

Any thoughts?

Brenda, you are on track. Remember inflation and health insurance in your planning. Live intensely with firecalc for a few days.

That said, you are a prime target for variable annuity salespeople. You have more to shelter than you have room to shelter. Be afraid, be very afraid.

I suspect most around here will prefer a wisely allocated investment portfolio.

 

[LOL!]

Places NOT to invest: variable annuities, whole life, universal life.

 

[MooreBonds]

Fixed income: Pen Fed 7-year CD-equivalents APY 6.00%

Mutual Funds: You could do a lot worse than simply plunking it down into Wellesley.

 

[samclem]

Some opinions:
- Picking stocks or calling market ups/dowsns successfully is very unlikely to result in a net gain over buyig and holding a well-chosen allocation of investments. Still, many of us try to beat the market. It s human naure. Some of us recognize this dichotomay and invest the bulk of our holdings in "boring" index funds and take a small portion to use for speculaton. This might satisfy your penchant for stock picking while allowing the bulk of your savings to build up in low-cost investments.
-- The Vanguard Total Stock Index Fund is a good choice. You can get broader diversification and an automatic re-balancing of asset classes by choosing a Vanguard Target Retirement Fund that fits your risk tolerance (but as an early retiree, you'd probably want to pick a "target date" that is considerably later than when your ER date, since the bond allocation might be too high for a elative youngster. Much depends on what is in your tax deferred retirement accounts, etc).
-- Regardess of how agressive your portfolio is, figuring on a 10% return (either before or after inflation) is proably highly optimistic. Many folks believe a 4-5% real rate of return is closer to what we'll likely get.


Yes, stay away from annuities and whole life insurance. Keep your investing costs low. Costs matter.

 

[chris2008]

Another option: Repay your mortgage early by making one more payment per year or a bulk payment. Interest and compound interest build up over 11 years and might be equal to what you might get from a mix of other investments - and the result is guaranteed!
Tax advantages of mortgages are highly overrated IMO. With your side business it might be different, though.

 

[SingleMomDreamer]

Thanks for the advice. I'd been looking at Vanguard for some time as well as index funds, so I will move in that direction once my emergency funds get back to where they should be. And I know I'll continue to dabble some in the stock market as I enjoy the challenge and have been successful thus far. Now to sell a few books...

 

[milmoose]

Options I'd recommend:

- IBonds. Buy when the fixed rate is equal to or greater than 1.4%.
- Hold cash in a money market fund or high yield checking. 5% isn't terrible.
- Plain-old taxable mutual fund. Just buy an index fund and hold for the long-term.
- If you have a Deferred Comp plan at work, consider taking part.

- M

 

[bssc]

I would also vote for Vanguard Index Funds.

 

[spideyrdpd]

Did you include the roth in retirement funding ?
The roth can also be considered an emergency fund. Since you can take out the money you put in after taxes with no tax and no penalty.

You can open up a sep-ira with the business but I am not sure how much it would cost you to do. Or if its really worth it. Since your just delaying some taxes.

Most of the people here go with diversified index investing. The ones that dont some times get drowned out by the more conventional types. You would have to decide on your risk tolerance.

added -
Just noted your title - you can look to fund the childs roth. You want to make sure you have insurance taken care of. Term life, disability. You also want to have an advanced living directive and a will.

 

[cute fuzzy bunny]

Vanguard target retirement funds or lifestrategy funds. The TR funds adjust over time to become more conservative as you approach their 'maturity date'. The LS funds pick a risk/return level and remain there.

So you can pick auto-pilot or just the power steering. Low cost, automatic diversification, good long term core holdings.

 

[mb]

I suggest keeping it simple in the after tax porfolio.

Vanguard Total Market
Vanguard Total Int'l
Optionally a Bond Index Fund or Muni Fund depending on tax bracket and anything that you don't have access to in the before tax account

Minimizes the yearly tax bill and makes it easy at tax time.

Put everything else in the pre tax account.

MB

 

[Caroline]

What everyone else said... plus... if you believe you'll have plenty by 65, why not invest a little in yourself, if you're not already doing so?

Be sure to have some fun (with and without the kids) along the way.

Congrats on a great outlook!

P.S. What are you writing / publishing? You have a particular niche?

 

[Alex]

I'm 43. My retirement accounts should hit $250k by the end of the year. I plan to continue contributions for the next 7 years, but even at $250k, assuming 10% annual rate of return (aggressive portfolio) and with no further contributions, the time-life calculations put me at $2 million by the age of 65. That's plenty for me as I'm a cheapskate at heart.

I have 11 years left of paying for my house (4.25% interest rate). I just started a small business on the side, which I'm hoping will eventually net $25-$50k annually in a few years. I've been able to fund that investment from cash until this last week when I finally had to tap into the $5k line of credit. But the "big bleed" for the business is over and I hope to see some positive cashflow coming my way in a few months.

I now need to build a portfolio outside of my retirement. I have some individual stocks and seem to have a knack selecting the right stocks at the right time (most of the time), but I'll need to find some less-risky options. What advice do you have in regard to where to put away the pre-tirement income?

Oh, the side business is a small publishing company (just my own books at the moment). I'd like to retire from my regular job at age 50 and sustain the publishing company as a means to exercise my brain and bring in some income. Besides, it's rather fun.

Any thoughts?

Thanks,
Brenda

Personally I think you would be better off investing in VG Total stock market index and Total Int'l. These type of index funds are passively managed and have low turnover and low capital gains exposure = low tax exposure. Then you can make adjustments to your tax advantaged accounts to keep the correct percentage of stocks/bonds that your asset allocation calls for. Hold your bonds and other fixed income instruments in your IRA's and 401k's or, if you must, use tax free muni funds in taxable accts. Good luck!!

Vanguard target retirement funds or lifestrategy funds. The TR funds adjust over time to become more conservative as you approach their 'maturity date'. The LS funds pick a risk/return level and remain there.

So you can pick auto-pilot or just the power steering. Low cost, automatic diversification, good long term core holdings.

for a taxable account? The impact of taxes cannot be underestimated.

 

[SingleMomDreamer]

Solid, good advice. Of course, the stickler is, getting the business to turn green in the next year. Caroline--you can find info on my books at the 10steps2adoption website. I have plans to branch out beyond this niche, but it's a good start. My goal is to publish how-to and self-help books and market the heck out of 'em. I know it will take some time to generate the additional income, but I'm pretty confident that I can do it.

 

[cute fuzzy bunny]

Agreed. But neither the TR funds or Lifestrategy funds are particularly tax inefficient. Granted there are better, but...