Short-term Investing Ideas Needed

[nivek]

Hi, folks. I'm new to this forum. I used to read one of the other ER forums and am just starting with this one.

I've got two big tax bills coming up in 2011 and 2012 due to a LTCG investment I liquidated and a conversion of a SEP-IRA to a ROTH in 2010.

I also have college for two kids to pay for in 2012-2016 and 2014-2018.

I've got the money set aside for both those in cash. I hate to see it earning nothing. I could get 1% in a high-yield savings for the tax money and 1-2% in a CDs, but was hoping to do a little better than that without incurring a lot of risk.

Any thoughts?

- nivek

[REWahoo]

Welcome to the forum nivek. Here are some recent threads on a similar subject:

http://www.early-retirement.org/foru...-do-55324.html
http://www.early-retirement.org/foru...ash-55039.html
http://www.early-retirement.org/foru...und-54937.html

[Spanky]

Quote:

Originally Posted by nivek I also have college for two kids to pay for in 2012-2016 and 2014-2018. - nivek

Have you thought about student loans? The interest rate is only 4.5%.

[nivek]

Quote:

Originally Posted by Spanky Have you thought about student loans? The interest rate is only 4.5%.

I'm not sure I understand. Why would I want a student loan when I have cash already set aside to pay for it and I can't find anything safe that gets a 4.5% return?

[LOL!]

Quote:

Originally Posted by nivek I also have college for two kids to pay for in 2012-2016 and 2014-2018. I've got the money set aside for both those in cash. I hate to see it earning nothing.

Cash? WHy don't you have this money in 529 plans There are many investment options, but it's all tax-free growth when used for college. Check out the Virginia self-directed VEST 529 plan with Vanguard options. If you are risk averse, I'm sure there must be some age-based options with lots of fixed income. Cash? That doesn't make any sense to me.

Do not confuse the low-expense Vanguard options with the higher expense advisor options in this Virginia 529 plan.

[steelyman]

Quote:

Originally Posted by LOL! Cash? WHy don't you have this money in 529 plans There are many investment options, but it's all tax-free growth when used for college. Check out the Virginia self-directed VEST 529 plan with Vanguard options. If you are risk averse, I'm sure there must be some age-based options with lots of fixed income. Cash? That doesn't make any sense to me. Do not confuse the low-expense Vanguard options with the higher expense advisor options in this Virginia 529 plan.

I was surprised to see in the New York Times today an article saying that some states 529 plans may not pay back what they offered:

http://www.nytimes.com/2011/04/02/yo...2money.html?hp

[LOL!]

^ That's old news, so it should be no surprise. Some of these plans were shut down since they were too good to be true. Those are typically the pre-paid plans. They are not like the 529 plans where you invest in well-established mutual funds and get the returns of the mutual funds.

[Spanky]

Quote:

Originally Posted by nivek I'm not sure I understand. Why would I want a student loan when I have cash already set aside to pay for it and I can't find anything safe that gets a 4.5% return?

It's true that the chance is slim getting a guaranteed return of 4.5%. It would be better not to take out a loan if the intent is to pay for the entire cost of education. My thought is NOT to pay for the entire cost. Have your kids bear some of the responsibility for their education. Student loan debt is one way to establish and build a solid credit history and an opportunity to manage their own debts. Your children will have decades of working years to pay off the debt. They might qualify for a loan forgiveness program if they chose to work “qualified public service job” for at least 10 years. Your savings should be left for your retirement. It does not mean you have no love or devotion to your kids. It's about finance. That said, you are free to pay for the whole thing.