Where to go from here? (Investment Question)

[GatorBuzz]

Okay, here are our specs:

• Two Roth IRAs, which have been maxed this year. Both in Vanguard Target/Retirement Funds.
• Maxed out my 401k to the company’s matching.
• Put $3,000 in Vanguard’s Total International Index Fund, b/c the Vanguard Retirement Funds are weighted much more on the US side.
• $10,000 in a Rainy Day Fund in ING Direct’s Orange Savings at 4.5%.
• Paid off all debt, except house and a new car (used late model 4Runner with low miles) we had to buy b/c my old one was totaled. I’m paying the car off fairly quickly and am down to 16k. I’m going to pay $2,000 a month for the next eight months to wipe that out.
• I have about 22-25 years to go before I FIRE.

In addition to this, I spend money every month on remodeling. We're remodeling this house to sell in a year.

With the money that is leftover after the above and other expenses, from now on until next year (when I can begin contributing to the Roths), I'm kinda stuck. I wonder if I should just keep pumping money into the International Index Fund, buy another fund, pay off the car quicker, etc.. Any suggestions?

Secondly, I'm not sure we're going to have $666 dollars every month next year to contribute the max to our Roths. So, I was thinking about holding some back now in our high-interest savings account for that. Good idea, bad idea?

Any other suggestions or advice is appreciated.

Thanks.

 

[theoldwizard]

Okay, here are our specs:

• Two Roth IRAs, which have been maxed this year. Both in Vanguard Target/Retirement Funds.
• Maxed out my 401k to the company’s matching.
• Put $3,000 in Vanguard’s Total International Index Fund, b/c the Vanguard Retirement Funds are weighted much more on the US side.
• $10,000 in a Rainy Day Fund in ING Direct’s Orange Savings at 4.5%.
• Paid off all debt, except house and a new car (used late model 4Runner with low miles) we had to buy b/c my old one was totaled. I’m paying the car off fairly quickly and am down to 16k. I’m going to pay $2,000 a month for the next eight months to wipe that out.
• I have about 22-25 years to go before I FIRE.

First, your should be targeting your rainy day fund to be holding 6 to 12 months or expenses. At $10K, I'm guessing you have a way to go.

Second, insurance. Got some term life on both of you ? Start looking at accident and long-term health. As your wealth increases, consider an umbrella liability policy.

With 20+ year until your retirement, I think you are being too conservative with your IRAs. Look into sector funds (oil, gas, commercial real estate, international). Higher risks, higher rewards. Shoot for at least an annual 10-15% ROI. in todays market, this is achievable, even with 3 star and above mutual funds.

 

[Dude]

With 20+ year until your retirement, I think you are being too conservative with your IRAs. Look into sector funds (oil, gas, commercial real estate, international). Higher risks, higher rewards. Shoot for at least an annual 10-15% ROI. in todays market, this is achievable, even with 3 star and above mutual funds.

Target Retirement 2030 thru 2050 are all up over 9% YTD.....and we're only 5 months in

 

[gindie]

Secondly, I'm not sure we're going to have $666 dollars every month next year to contribute the max to our Roths.

Actually, next year it will be 833.33 (416.66 x 2) as the limit increases to $5000.

 

[GatorBuzz]

Good call, gindie. I forgot about that. That will be even a little tougher on us to max out. I still might save a thousand or two or three back from throughout this year for next year's IRA. I don't know how wise that is, though. I'm new to this game.

Thanks for the advice, wizard. I'm comfortable where I am right now with the IRAs, to be honest. I will do some research into some sector funds and see what I think, though.

 

[kaudrey]

Hi,

You have to decide what you want your overall allocation to look like, and go from there. Meaning, break down the target retirement fund into its components (large cap, small cap, bonds), and see what percentages are in each. Then add in whatever is in the 401K and the International, and see what percentage those make up of the total portfolio. You shouldn't look at any of them in isolation, so without more information, it is hard to be more specific.

You might want to diversify into REITs, and add a splash of Emerging Markets to your International, depending on your risk tolerance.

The target funds by design are diversifying your portfolio, so you want any additions to balance that out properly.

Karen

 

[VaCollector]

I spend money every month on remodeling. We're remodeling this house to sell in a year.

I'm sure that you are already aware....but be sure that you've lived in the house at least two years (prior to closing date) to take advantage of your tax free (personal residence ~ $250K per person exclusion of the profit) sale !!