Investing Advice Please

[aehardin]

Hello All,
I'm looking for some sound investing advice for my wife and I. My wife and I just got married and we want to start saving and investing our money for the long-term.

So here is the scenario: She's 25 and I'm 33. I'm currently a professional MBA student on scholarship and she's working full-time. After I graduate in two years she's going to get her Master's degree. Right now we have around $5,000 to $8,000 initially to invest and would like to add money on a monthly basis ($400 to $600). We want to have our funds diversified and in places where we can pull money out if needed. Neither of us have retirement plans as of yet...just money market accounts and CDs. We also currently own a condo, which we plan to sell after I graduate and expect to make anywhere from $20,000 to $40,000 equity which can be invested too. Our goal is more for long-term stability than short term gains...but we'd like to make decent return on our investment. I'm currently taking my first finance class so this is new two me...that is why I' here.

Any financial investment advice would be greatly appreciated. Thanks!

[disneysteve]

Welcome to the site.

You've said quite a few different things in your post, some of which are incompatible with others I think. Can you answer a few questions and clarify some things for us?

What percentage of income are you currently saving?
Do you have an adequate emergency fund set aside?
When you sell the condo, where do you intend to live?
Do you currently have an income or are you a full-time student?
When your wife starts her Master's program, will she continue to work?
Does her employer offer a retirement plan like a 401k or 403b?

As for investing, you say you have 5K-8K right now and plan to add $400-$600/month. What exactly is that money for? Is it for retirement? Is it for a down payment on a house? Is it for other needs? You say your goal is "long-term stability" but also say you want the money in "places where we can pull money out if needed."

The more details you can provide, the more we can offer advice.

[aehardin]

Hi, here is the answers to your questions:

What percentage of income are you currently saving?
Currently between the two of us, we are saving roughly 15% of our income.

Do you have an adequate emergency fund set aside?
Yes, we have money other than the amount we are planning to invest set aside for emergencies. We probably have at least enough fot 6 months or longer.

When you sell the condo, where do you intend to live?
After I graduate, we are moving to Washington D.C. where we only plan to rent. My scholarship requires me to work for the Fed. Govt for 2 years. We want to move back to California after contract is up with the Fed. Gov't.

Do you currently have an income or are you a full-time student?
I'm being paid to go to school. All of my tuition expenses are paid, plus I am paid approximately $40k/yr in stipends to cover cost of living expenses.

When your wife starts her Master's program, will she continue to work?
No, she won't. We'll be using my income to pay for her tuition. I'll be making more than enough to pay for her tuition.

Does her employer offer a retirement plan like a 401k or 403b?
No.

As for investing, you say you have 5K-8K right now and plan to add $400-$600/month. What exactly is that money for? Is it for retirement? Is it for a down payment on a house? Is it for other needs? You say your goal is "long-term stability" but also say you want the money in "places where we can pull money out if needed."
The money is for long-term retirement for the most part. But we'd like money available for short-term savings as well for future car purchases and when we decide to buy another condo/house in 4-5 yrs. We need ot know what to do with equity after we get it so that it's available for another down-payment for a house when the time comes.

The more details you can provide, the more we can offer advice.
Please let me know if you need anymore information. And thanks for your help!

[jIM_Ohio]

15% to retirement is good. If possible, you want to direct this to a 401k or IRA. Depending on your tax situation, the IRA might be traditional or Roth.

I would research taxes and risk profiles before making a decision.

Read these threads and post questions here.

http://www.savingadvice.com/forums/investing-banking/50669-questionaire-people-starting-retirement-planning.html

http://www.savingadvice.com/forums/investing-banking/50734-investment-risk-questionaire.html

[disneysteve]

The money is for long-term retirement for the most part. But we'd like money available for short-term savings as well for future car purchases and when we decide to buy another condo/house in 4-5 yrs. We need ot know what to do with equity after we get it so that it's available for another down-payment for a house when the time comes.

Money you will need to buy a home in 4-5 years should be kept safe in a high-yield money market and/or CDs.

Money for a car purchase probably falls into the same category unless you expect it to be more than 5 years away. In that case, you could take a little more risk with that money and consider some market exposure, though not a lot. You don't want to find yourself in need of a car and short on funds.

Retirement savings, as Jim suggested, should ideally go into some type of tax-sheltered vehicle. The most common are 401k, 403b and IRA, though there are some others depending on your employer. You say you will be working for the government for 2 years. You may be able to contribute to the thrift savings plan during that time. For right now, I'd look into opening an IRA/Roth (depending on your income and tax situation).

[jIM_Ohio]

Money you will need to buy a home in 4-5 years should be kept safe in a high-yield money market and/or CDs.

Money for a car purchase probably falls into the same category unless you expect it to be more than 5 years away. In that case, you could take a little more risk with that money and consider some market exposure, though not a lot. You don't want to find yourself in need of a car and short on funds.

Retirement savings, as Jim suggested, should ideally go into some type of tax-sheltered vehicle. The most common are 401k, 403b and IRA, though there are some others depending on your employer. You say you will be working for the government for 2 years. You may be able to contribute to the thrift savings plan during that time. For right now, I'd look into opening an IRA/Roth (depending on your income and tax situation).

I will second what steve said.

Put 15% into a tax sheltered account for retirement. Put another 5% into a short term savings account for a house or car. Do not mix the funds.

One pet peeve I have is you always fund your longest term goals first- like retirement- and then you sacrafice short term goals along the way. Some short term goals are not really needed or disappear without ever being addressed. We can pretty much guarantee most of us will need money in retirement, and there are no loans for that, and not many other options other than funding it ourselves.

Retirement is the "easiest" goal to reach even though it takes the most money because you have time if you give yourself the time.

Short term goals are easier compromised- for example if you do not get a new car, and get a used car instead, the short term goal was accomplished, and cutting a corner or two saved you some money.