Investing small money

[Fishmasterdan]

I am new to hole investing this. Wondering were would be a good spot to park 5k every 6 months. I was looking at Roth iras but don't like the idea of waiting till 59.5 to access them when I plan to retire at 58?? Any better options??

Just thinking it would be better to have cash in an accessible fund vs a savings account

 

[Chuckanut]

I am new to hole investing this. Wondering were would be a good spot to park 5k every 6 months. I was looking at Roth iras but don't like the idea of waiting till 59.5 to access them when I plan to retire at 58?? Any better options??

Just thinking it would be better to have cash in an accessible fund vs a savings account

IIRC, you can take the money you contribute to a Roth out at anytime. After all you have already paid the taxes on it. It's the tax-free earnings - the children, grand children, great grandchildren..... of you contributions - that have the age limit. And there are some ways to get around that, though not as a lump sum withdrawal.

Keep in mind if take out your contributions, then they will no longer earn tax-free income. I would thing [-]twice[/-] three-times about that. YMMV.

 

[NW-Bound]

You can always withdraw the original contributions you make without penalty at any time.

Let's say from 48 to 58, you have put $6K each year into Roth. By 58, you have contributed $60K over 10 years. Suppose that the stash has grown to $100K. You can withdraw the original $60K anytime, at any age, without penalty and taxes. The restrictions are only for the $40K gain.

See this for more details: https://www.schwab.com/ira/roth-ira...w contributions you,earnings in your Roth IRA.

Roth IRA is a good place to put your after-tax savings, because the investment gains are accumulated tax-free, while the original contribution can be tapped if you are in a tight spot, such as loss of job or in an emergency. Roth IRA is a good deal, hence they don't allow it for people with high incomes.

On the other hand, if your income is well inside the 12% bracket, you can get capital gains and interest/dividend tax-free, which is even a better deal than Roth because you can access the gains with no restrictions before 59-1/2.


PS. The annual limit for Roth contribution is $6K, and $7K if you are 50 or older.

 

[OldShooter]

Good plan. Good habit to get into. The Roth is a fine idea, but don't get tempted to treat it as a piggy bank. Put the money in, leave it there until you need it in retirement.

Some easy starter reading:

"If You Can" by William Bernstein https://www.etf.com/docs/IfYouCan.pdf (free 16 page download)

"The Coffee House Investor" by Bill Schultheis https://www.coffeehouseinvestor.com/ (This is Bill's first book; read it before reading his second one.)

A little more advanced but still easy:

"The Bogleheads Guide to Investing" by Taylor Larimore et al https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365

"The Simple Path to Wealth" by JL Collins: https://www.amazon.com/Simple-Path-Wealth-financial-independence/dp/1533667926

"Winning the Loser's Game" by Charles Ellis https://www.amazon.com/Winning-Losers-Game-Strategies-Successful-dp-1264258461/dp/1264258461 (latest edition, May 2021)

 

[GenXguy]

PS. The annual limit for Roth contribution is $6K, and $7K if you are 50 or older.

And the limit is $500 higher in 2023.

 

[Koolau]

PS. The annual limit for Roth contribution is $6K, and $7K if you are 50 or older.

AND IMHO you should put every dollar you can spare (up to these limits) into your ROTH IRA - every year while eligible. It's still one of the best investment strategies you can use (my opinion - but YMMV.)

 

[mystang52]

Without going into specifics, which would have to be much lengthier, consider putting such money into 3 places. What percent for each is your decision, but make sure you allocate some into each of these 3:
Retirement savings (i.e., money you will not withdraw until retirement)
Liquid savings
Emergency fund.

 

[Fishmasterdan]

Thanks for the info. Specifically who do you like as a broker?
I am 50 so I can put in the 7k

 

[pb4uski]

Another good option would be to establish an account with Treasury Direct and buy IBonds that will keep pace with inflation and are currently paying 6.89%. The rate resets every 6 months.

 

[Fishmasterdan]

Another good option would be to establish an account with Treasury Direct and buy IBonds that will keep pace with inflation and are currently paying 6.89%. The rate resets every 6 months.

This is awesome. Thank you for this advice

 

[sengsational]

Both Roth and I-Bonds have annual maximums, and Roth requires earned income. Great options for saving.

 

[Out-to-Lunch]

Thanks for the info. Specifically who do you like as a broker?
I am 50 so I can put in the 7k

The big three recommendations are the low-cost houses of: Vanguard, Fidelity, and Charles Schwab.

 

[Sunset]

Thanks for the info. Specifically who do you like as a broker?
I am 50 so I can put in the 7k

I hope you already have a big pile of $$ invested in retirement and taxable accounts as age 50 is pretty late to begin saving.

 

[Morgan22]

Thanks for the info. Specifically who do you like as a broker?
I am 50 so I can put in the 7k

I've only used Fidelity, Merrill Edge, and Vanguard. Out of the 3 I recommend Fidelity. They will likely assign a representative to you. You don't have to use them as an advisor or buy any products. But I have found they are good to bounce any questions off of.

 

[Fishmasterdan]

I hope you already have a big pile of $$ invested in retirement and taxable accounts as age 50 is pretty late to begin saving.

Yes thanks. I am on track to see about 1.4m at 58 these are in long term IRAs. ( union pensions and money market accounts I cant access till 55)I'm mostly looking for places to park smaller personal funds that make more than the average savings account. Example would be 30k just sitting in a savings account for emergency stuff.

 

[OldShooter]

You can find online reviews comparing Fido, Schwab, and VG. I would recommend the first two as they provide a little more investor support. VG is usually thought of as a bare-bones, low cost, choice.

It's nice but not mandatory to have a nearby bricks & mortar office of your broker. If you have both nearby that is a plus and you can make visits to assess which one looks more comfortable to you. Re having an assigned rep ask about that. IITC Schwab's threshold for that is $1M accounts balance. Fido's is probably similar. But you don't get what you don't ask for.

IMO it would be a good idea to stay away from the managed accounts (with fees) that all brokers would like to sell you. Take your time, read some books, and invest maybe a year in self-education. Then decide.

 

[Koolau]

I hope you already have a big pile of $$ invested in retirement and taxable accounts as age 50 is pretty late to begin saving.

NEVER too late to start saving!

 

[qwerty3656]

This is where I sent my brother when he was asking for ideas. They have a number of simple low-cost portfolios to mirror.

https://www.bogleheads.org/wiki/Lazy_portfolios

 

[NW-Bound]

To retire early, some people can withdraw money from their 401k starting at 55. Else, you need to have some after-tax money to live on till 59-1/2.

A Roth account is better than after-tax savings in the above aspect, because you can draw the original contributions if you need it. My income was too high to be allowed any contribution, so I did not have that option.

My wife quit work at 50, and I at 55. From there to 59-1/2, I drained much of my after-tax savings. Thought about doing 72(t) distributions to draw from IRA, but I never did and managed to live on after-tax savings.

 

[Koolau]

To retire early, some people can withdraw money from their 401k starting at 55. Else, you need to have some after-tax money to live on till 59-1/2.

A Roth account is better than after-tax savings in the above aspect, because you can draw the original contributions if you need it. My income was too high to be allowed any contribution, so I did not have that option.

My wife quit work at 50, and I at 55. From there to 59-1/2, I drained much of my after-tax savings. Thought about doing 72(t) distributions to draw from IRA, but I never did and managed to live on after-tax savings.

I nearly had to get into my Roth money even though I only had a couple of years between FIRE and 59.5. We spent WAY more than we thought since we did a major Reno on our place in Paradise. We sold our mainland house and thought that would be enough to live on - but it was only just barely. Something to think about for folks bailing before 59.5, but YMMV.