Where to Invest After Your IRA Is Maxed?

[TonySoprano24]

Hey I was just wondering as I'm getting closer and closer to my job I calculate that I'll be able to save a lot...probably around $500-$700 just for retirement

IRA limit is $5000 which is like $400 a month or so...what do you guys do after you max out your ira? stick it in a taxable broker account or do you guys put it in a online savings account or something else all together?

Also I was wondering about online savings accounts...specifically ING direct if anyone uses that...right now theyre offering 1.50% apy but I guess in normal economic circumstances they would go 2%+ ...my current bank only offers 0.5% apy ...do you guys use onlien savings accounts or do brokers offer good rates on cash balances?

thanks

 

[ziggy29]

Tony, I'll give my thoughts if you promise not to have me whacked.

What are your goals for this money? How long is it going to be until you need to start drawing from it? If less than five years, CDs are probably your best bet, pathetic as the yields are. If more than ten years, your options grow. If more than 20 years, you can definitely accept more volatility for growth if your stomach can take the ride. What's your tax bracket and how important is tax efficiency and/or tax deferral here?

 

[TonySoprano24]

Well im 21 (22 in august) and my time horizon is probably 30 years or so...prolly wana retire around 50 ish

starting out my tax bracket will be prolly 25% ill be making like 45k a year for the first couple of years

thats for the retirement ...i have decided i will go with vanguard and just do an index fund starting out...i dont know what to do with the remaining 200-400 i will have that i need to save for retirement to reach my goals...because i cant stick it in an ira...so was asking if i shud stick it in a regular taxable mutual fund with vanguard or something...tax defferal/efficiency is probably the #1 priorirty for my retirement account...


then the savings which I want just for liquid assets and vacaiton fund basically ...I was gonna deposit 100-200 a month in a liquid savings account and maybe take it out at the end of the year for a vegas vacation or a cruise or something...also this account will be used for my emergency fund and anything i have left over...

 

[bank5]

Does your employer offer a 401k plan? If so, do they offer a contribution match? You probably want to at least get the company match if that's an option before putting money in an IRA.

I had an ING Direct account until I switched to my credit union. The rates were around 4% a few years ago so hopefully 1.5% is as low as they'll go.

 

[TonySoprano24]

no they have like a private stock program which i will find more about this week but i guess i should find out about that and then post here

they said you can dedcut 10% of your paycheck and you normally get around 8-10% return because its just a function of company growth, profits, etc...

 

[travelover]

You might just want to go with Vanguard Total Stock Market in a taxable account. Then you only have to pay yearly taxes on dividends and eventually pay capital gains taxes in 30+ years when you retire. Dividends (and capital gains from internal sales) should be minimal on an index fund.

Once you decide on an asset allocation you can tweak this, but it is a good, easy start. This is for long term money (10+ years). Short term just go with CDs or a money market fund.

 

[walkinwood]

Congratulations on starting so young!

Look into a Roth IRA v/s traditional IRA. Your local library is a great resource!

If you have a 401-K, it makes sense to at least match your employers contribution.

And...there's nothing that says you can't stash away and invest after tax $s in a taxable account. My taxable accounts are much larger than my tax-deferred ones.

When I started investing (For me it was when I turned 30), I selected 3 of mutual funds (large domestic, international, short term bond) and enrolled in an automatic investment plan with direct deduction from my bank account. It was the best thing I did. I never saw that money and it grew very nicely over the years.

Read a good investment book like William Bernstein's 4 pillars & pick a good asset mix and funds to support it and do the Automatic Investment.

 

[TonySoprano24]

Great advice guys thanks!...yeah the retirement money i won't even touch but I'll have a taxable account for my extra savings left over every month and I wana have some money for not short term or long term but sort of mid term ...donno what i wana do with the money yet but im sure it will be something like buy a house or maybe start my own business once i get tired of working for the man

who knows i might open up a strip club and name it bada bing

free entry to ET forum people!

 

[aaronc879]

There is no one right anwser. For now I would suggest:
1. 401K up to company match
2. Max ROTH IRA
3. monthly contribution to taxable account(VTSMX is were I put mine)
-set up automatic payment from your checking account. Even if it's only $100/mo at first.
4. money market/short-term CD's for home down-payment and e-fund

After you buy a home, furnish it, and maintain an e-fund then, assuming your pay has increased, you can max(or at least increase) 401K contributions and continue with 2-4 above.

 

[CuppaJoe]

I kept my entire taxable PF in large cap mutual funds until I was about 44 years old and then sliced and diced it with new money. They didn't have IRAs and 401ks back when I started and taxes never amounted to much. When IRAs were introduced I opened one with CDs which were paying 15%, when CDs went below 10%(!) I moved the money into equities. Over the years some of my company benefits were discontinued and transfered to me; the smartest thing I ever did was to roll those funds into my IRA and never touch them.

I was pretty much a buy and holder until I was ready to retire and set up buckets. The idea of buy and hold is a little deceptive because I bought things to diversify that looked like they had good upside potential at the time; of course, what looks good changes with economic conditions and lessons learned in downturns.

If I were in my 20s now, I would be 100% equities both for taxable PF and deferred income. That was my risk tolerance; I never lost much sleep over the ups and downs and did see the PF drop 20% a couple of times and about 30% once but in the long run it had a sweet rise in value. I didn't keep a regular savings account but did sell a few shares for big vacations.