No 401k, How to invest after IRA

[Davaldez21]

Hello,

My employer does not have 401k plans unfortunately, im 28 yrs old and I finally paid off my student loans and starting with my IRA this year. After maxing 11k on me and my wife IRA, where can i put my money to best invest. I only have low int debt of 3 percent (wife student loans, mortage).

When she starts working maybe we can get 401k via her job.

 

[pb4uski]

Do you qualify to have a HSA?

Otherwise taxable accounts are fine. If you invest in equities in taxable accounts you get a preferential tax rate on qualified dividends and long-term capital gains of 0% or 15% (vs 15% or 25% rates on interest in the same tax brackets).

 

[Senator]

There is always an after tax savings. My after tax savings is larger than my pre-tax savings (Roth, HSA, after-tax).

Counting my real estate, it's about 4x what my pre-tax savings is.

 

[Animorph]

Open a Vanguard/Fidelity/Schwab/etc. brokerage account. Invest in something that throws off little yearly income or capital gains. Index equity funds would fit about as well as anything. You're trying to avoid paying taxes other than capital gains due to selling shares far in the future. If you are in the 15% tax bracket, qualified dividends and capital gains may be taxed at 0%, which would help out.

I don't worry about it too much. Pretty much my normal AA in our taxable accounts. No need to distort your AA just to avoid some current taxes.

 

[samclem]

Hello,

My employer does not have 401k plans unfortunately, im 28 yrs old and I finally paid off my student loans and starting with my IRA this year. After maxing 11k on me and my wife IRA, where can i put my money to best invest. I only have low int debt of 3 percent (wife student loans, mortage).

When she starts working maybe we can get 401k via her job.

Do you/your wife have any income from self-employment ( a small sideline business, etc?)? If so, you could contribute quite a bit to a "Solo 401K" or a SEP-IRA.

You said "IRA", but if your tax bracket now is lower than you expect it to be in retirement, you might want to consider a Roth IRA. No tax deduction today, but entirely tax free later. As a bonus, any contributions to a Roth can be withdrawn at any time tax free and without penalty (which is something you wouldn't want to do, but in this way the Roth can double as your in extremis emergency fund. Earky withdrawals from a traditional IRA can be heavily taxed/penalized). Typically, people at the start of their earning years can be better off with a Roth. while a "traditional IRA" is optimum when they start being taxed at rates above the rates they expect to experience in retirement.

 

[Davaldez21]

Thank You for replies.

I work in the medical field, no HSA since our health insurance is free, part of my job. I would have to talk to my tax agent about a solo 401k.

Additionally we currently make 140k, my wife will start working in 24 months, we should be at 180-200k (I would be working a few less hrs once she starts working).

I was hoping to do a traditional deductible IRA due to my tax bracket. If I do regular deductible IRA can I switch it and pay taxes at the end of the year. My problem is that when I go to Vanguard Account it asks to choose between roth or regular IRA before opening act.

 

[gauss]

....

I was hoping to do a traditional deductible IRA due to my tax bracket. If I do regular deductible IRA can I switch it and pay taxes at the end of the year. My problem is that when I go to Vanguard Account it asks to choose between roth or regular IRA before opening act.

If you open a traditional (aka regular, non-Roth) IRA, then Vanguard will not know if it is to be used for a deductible vs. non-deductible purposes.

Each year, you will have the option to deduct your IRA contributions to this type of IRA, if you meet the IRS requirements (ie. minimum and maximum earned income).

You can deduct one year and then not deduct the next year. If you make non-deductible contributions you will need to remember to fill out IRS form 8606 which will keep track of your non-deductible contributions so that you can withdraw the contributions later without taxation (but any earnings would be taxed).

-gauss