What to do other than 401k and Roth IRA?

yellow heel · #1 (**permalink**) 08-17-2006, 03:57 PM

If you are maxing out 401k and IRA, are there any tax deffered (or not) options to save for retirement?

Other are investment options that will be good for the future (can I be any more vague?). I know I can open an on-line brokerage account start investing in mutual funds or ETFs but are there any other good ideas?

I don't have a kid right now (but married) but is it a good idea to start the college saving plan (I can't recall the name 529 or something like that).

I am pretty much open to any ideas.

Thanks in advance!

greedy4chips · #2 (**permalink**) 08-17-2006, 04:26 PM

Tax free municipal bonds (munis). Depending on your tax bracket these may be favorable to bonds that are taxed.

Low rate of return, but very very safe!

College education can be funded by Series I-Bonds at a current rate of 6.73% and any interest earned is not taxed if used for tuition or other school expenses.

jeffrey · #3 (**permalink**) 08-17-2006, 04:29 PM

Current I-bond is 2.41% (the previous 6 months it was at 6.73%) <a href="http://www.i-bondrate.com/">I-Bond Rate</a>

puck36 · #4 (**permalink**) 08-17-2006, 04:34 PM

Well personal I have my K, IRA (a roll over K from my old job) and a Roth IRA. I have an online savings account with HSBC that pays 5.05% that I'm using to save my emergency fund and down payment. I also have a small amount of money in my paypal account that pays 5%.

To answer your question about saving for college when you don't have kids, I would say just open an online savings account or a good mutual fund account and use that. That way if you don't ever have kids you have that money for retirement or for what ever. But if you do have kids then you can pay for their college.

Here is some information about the 529 plan.
<a href=http://money.howstuffworks.com/5297.htm>How 529 plans work</a><p>

greedy4chips · #5 (**permalink**) 08-17-2006, 04:37 PM

Quote:

Originally Posted by jeffrey

Current I-bond is 2.41% (the previous 6 months it was at 6.73%) <a href="http://www.i-bondrate.com/">I-Bond Rate</a>

Holy woulda, coulda, shoulda batman!

Thanks for the update! I haven't checked the rates in a long time. What a drop in rates.

I wonder why such a drop?

sweeps · #6 (**permalink**) 08-17-2006, 04:53 PM

I-Bond rates dropped because inflation rates were relatively tame at the time of the reset. In my view, i-bonds are overrated as investments.

OP: Another possibility is a health savings account. It's not for everyone but could be another good way to save.

yellow heel · #7 (**permalink**) 08-17-2006, 05:17 PM

Thanks for the response!

i-bond seemed attractive if it was at 6.73%!! But at 2.xx% I will keep my ED saving at 5.15%.

puck36 - thanks for the 529 info! I will do some homework there.

Since I already have a decent saving account, will my best bet be opening a mutual fund account? if so any recommendations on a good online broker? I use Fidelity for both 401k and Roth. I guess they are ok but not the best I presume.

I was contemplating laddering 6 month CD at whatever the CD rate for 6 month is currently...

Any other suggestions?

puck36 · #8 (**permalink**) 08-17-2006, 05:42 PM

6 month CD rate at wellsfargo is 2.20% - 3.70% depends on the amount of money and you have to have a minimum opening deposit of $2,500.

$0 - $4,999 2.20%

$50,000+ 3.7%

so with an online savings account you get 5.05% with HSBC no matter what dollar amount you have in it.

Something to think about.

yellow heel · #9 (**permalink**) 08-17-2006, 05:48 PM

I noticed that the online saving/CD has MUCH higher rate than my local bank!! This is why I switched last year (better late than never).

My current saving account is at Emigrant (former ING but got pulled into ED's higher rate 5.15%!!). I believe the CD at Emigrant is at 5.35% or something.

TinyFish · #10 (**permalink**) 08-18-2006, 12:27 PM

I'm thinking the 6 month CDs and savings accounts mentioned so far might not get Yellow the return he/she needs for retirement savings, which I think is what the question is about. Or am I misunderstanding Yellow, and you are saving for something else instead or in addition to?

Of course, there is always the question of do you need to save more for retirement. I struggle with that one myself. I'd be interested to hear what people have to say about whether you should save additional funds for retirement and how you should invest them.

Here is a question, do you own a home? If it won't be paid for by retirement you might want to consider paying it down. Sure, unless you have a huge interest rate it won't get the yield of an investment, but the peace of mind might be worth it.

-TinyFish

greedy4chips · #11 (**permalink**) 08-18-2006, 01:26 PM

My 6 month CDs at Etrade are paying 5.46%. There are a couple other sites that are slightly higher 5.6%, but I am happy with Etrade's earnings. I have several there laddered.

For retirement? No, just to earn more than a savings acct and since I have 1 mature each month I am never too far from cashing one out at maturity in an emergency. My emergencies would go on a CC. So, if it wasn't for the CC I would have money in a ING Direct, HSBC, or Emigrant Direct acct. None of which I have.

I really should make someone here a referral fee...hint hint

yellow heel · #12 (**permalink**) 08-18-2006, 04:06 PM

Tinyfish - I am saving for everything... which I just realized is not a clear goal. I don't own a house so I just that is my priority number 1!! But with the real estate market in silicon valley, I have no idea how much I need saved up hence I am saving as much as I can (and trying to maximize what I have).

Greedy - wow 5.46%, that is very good. With all the numbers I see floating around in this forum, I'll end up with like twenty different online bank accounts.

I am currently 28yo married with no house. What should be my priority saving?

Should I save for the house, retirement or both or X% in house Y% in retirement? And what will be move efficient way for saving for these?

Hypersion · #13 (**permalink**) 08-18-2006, 07:14 PM

Right now I am

* 401K: putting in enough to get company match
* ROTH: maxed it out a few months ago
* 6 months e-fund: fully funded 1/3 in MM and the rest in bond mutual funds.

I have about $1000 a month after all my expensives that I can save but I not sure where to put this money? I could put more in my 401K but being only 26 I don't want to lock up all of my money until I'm 59.5. Buying a house would be nice but living the southern CA makes the mortage payment almost impossible.

TinyFish · #14 (**permalink**) 08-18-2006, 07:49 PM

Yellow,

Just to clarify. You are saying:

You (and your spouse?) max out your 401K (15k each) and also max out your IRAs (4K each this year I think).

Now you would like to know where and how to direct additional savings?

I'd say if you are doing that and want a house, and haven't got a debt problem, I'd save for a house. Find out how much you will need and set that as your goal (of course, that goal may move as housing prices fluctuate). Then figure out how long you will need to save towards that target. That determines where you should put it when you are saving.

Good luck.

-TinyFish

Jaynen · #15 (**permalink**) 08-18-2006, 09:48 PM

Very first post here guys! Hello to all. I would say first off see if it's going to be possible to go ROTH with that 401(k) (new for this year, check with your employer). I personally am just a really big fan of ROTHs, because I would rather go ahead and pay the taxes now, in my current bracket, than gamble as to what I might end up paying later on. Any hoo, depending on your AGI you might also want to go with the ROTH IRA; if you're over the threshhold, then see about going with a traditional. With all of my plans I choose to go the self-directed route, because I'm a big advocate of taking control of your own finances. Another thing you might want to consider is setting up a defined benefit plan; that's basically a plan where you define the benefit you want to receive when you retire and you're able to contribute as much as it would take to reach that amount in the time that you have until the specified date of retirement. Finally, what I just recently learned about was being able to take your funds that you have in a self-directed account to create a closely held entity, which would allow you (assuming you're the signing authority) to have access to those funds and use them to invest in whatever it is that you want. Cool huh? So this would in essence allow people to use their retirement plans to invest in real estate and all other kinds of things that they normally may not have been able to.

TinyFish · #16 (**permalink**) 08-19-2006, 08:26 PM

Jaynen,

What do you mean "I would say first off see if it's going to be possible to go ROTH with that 401(k) (new for this year, check with your employer)"? What is new this year about the rules with the Roth and 401K and what does this have to do with one's employer?

-TinyFish

yellow heel · #17 (**permalink**) 08-20-2006, 12:15 AM

Hypersion - What is the return on the 6 month e-fund? If you have 1000 to save, why don't put it in a online savings account to earn interest?

Yes, I hear you on the mortgage! I am in the same situation.

TinyFish - My wife does not work to I am the only one that has 401k and IRA. Currently I am putting 2k into savings but I don't know if this was the best way of saving. My saving account automatically withdraws 500 from my check each week leaving me limited cash for me to waste!

I have no idea how much I need to save up for a house. I know more is better but how much is enough? I currently have no debt so all the money left over is for the house or any emergency.

Jaynen - I am with tiny, can you clarify?

I appreciate everyone's comment.

Hypersion · #18 (**permalink**) 08-20-2006, 12:41 AM

Yellow - I keep about ~1.5 months worth of expeneses in my bank's money market (which pay 3.52%) my pay check get deposit in this accout and I can instantly transfer the funds I need to my bank checking accout and write check agaist it or use online bill pay. The other ~4.5 months are in bond mutual funds.

yellow heel · #19 (**permalink**) 08-20-2006, 01:10 AM

I see. Whats the return on the bond mutual fund? Is it better than 5%? Bonds are something I am interested in. I don't want to gamble with stocks. I want a stable return.

Ima saver · #20 (**permalink**) 08-20-2006, 09:59 AM

I would go directly with a stock mutual fund run by vanguard mutual funds. There is no brokerage fees,loads and it is very low cost. I am with vanguard index 500, it has averaged about 10% the past 20 years!(I don't work there, just have my roth ira's there.Plus, even tho your wife does not work, she can have a roth ira based on your income.