Retirement overkill? And what to do with the rest of my $$

[BuckyBadger]

So my husband and I each have a 401k/403b through our employers and we both have a Roth IRA. We will be opening up non-deductible IRAs in April. All of these will be in Vanguard-style target date funds. That's 6 accounts right there.

In June we will have a lump sum of approximately $50k to invest, and then going forward after that will have $2k to $3k a month to invest. I'm wondering what the best funds might be and how many accounts we should have. I'd like to stick with Vanguard mutual funds because it's easy but I'm open to other thoughts.

I was thinking about putting some amount into something pretty aggressive because we've got the time to wait it out (we are 30 and 31). And my inclination is to put more into something target-dated just because it's so simple. But what about shorter term things that we might not even know we want now. Where should I put money that I might want in 5-10 years rather than the money I will want in 25-35 years? I feel like I know what to do with the long-term money...

So two questions -- how many accounts should I have, and what should they be in. I am not afraid of risk, although I'm also not a crazy person!, and I have time on my side.

And maybe we are getting too crazy with the long-term money. We want to plan for retirement, but we don't want to be SOL if we suddenly need money for something or decide to start a family or something, or do something frivolous like buy a vacation home or something... (We currently have ~$95k in the 401ks and Roths.) Is throwing more $$ at retirement overkill, assuming that we are maxing out 401ks and non-deductible IRAs every year?

Okay, so three questions!!

NOTE: This investing will all be with money AFTER having funded an EF and having no debt other than a mortgage that I'll be accelerating payments on.

[bjl584]

If you are maxing a Roth, then you can't put money into a traditional IRA.

I would hold back some money from your retirement accounts in case, like you said, you need money today and not 30 years from now. Consider opening up a taxable brokerage account and within it keep some holdings in cash, individual stocks, and mutual funds.

You can have as many accounts as you like, but things will get confusing if you have too many. I have 5. A 401K, A Roth IRA, a taxable brokerage account, a checking account, and a savings account that I keep my EF and other funds for things such as a replacement car, a vacation, xmas gifts, etc.

[BuckyBadger]

If you are maxing a Roth, then you can't put money into a traditional IRA.

You're right. I misspoke. I'll go edit. I meant maxing out 401k and a non-deductible IRA. We can't contribute to the Roth any more due to income limits, but we still have them from when we could.

[BuckyBadger]

If you are maxing a Roth, then you can't put money into a traditional IRA.

I would hold back some money from your retirement accounts in case, like you said, you need money today and not 30 years from now. Consider opening up a taxable brokerage account and within it keep some holdings in cash, individual stocks, and mutual funds.

You can have as many accounts as you like, but things will get confusing if you have too many. I have 5. A 401K, A Roth IRA, a taxable brokerage account, a checking account, and a savings account that I keep my EF and other funds for things such as a replacement car, a vacation, xmas gifts, etc.

Is a taxable brokerage account (is this the same a mutual fun, just not a target dated one?) something that I have to be actively involved in? Or is it something that will just go ahead and do its thing as long as I keep contributing to it?

[MonkeyMama]

You can't save "too much" for retirement.

Actually, you can. You definitely can. BUT, you are talking about what to do with money after all your retirement options are maxed out. Which means, you aren't tying the funds up until retirement age. In that case, you really can't save too much. You can change your mind quickly and easily if you feel you need that money for something else. I see absolutely nothing wrong with saving that money (for the long term, with retirement in mind) until you have more firm plans about what to do with the funds.

As such, you just need one more taxable account. Sounds like you would prefer Vanguard? So open a taxable account with them.

If you like the idea of the Target Date funds, you can always use them. Even in a taxable account. Personally, for money I might need in 5-10 years (but am not sure), I like the idea of balanced funds. (A stock/bond fund - usually 40/60, 50/50, 60/40, something like that as far as stock/bond mix). Vanguard Star is one fund to look at. You'll get decent returns without the volatility of a mostly stock allocation. IT is also pretty simplistic. One fund.

[snshijuptr]

A taxable brokerage account (like a Roth IRA or 401k) is an umbrella account that you can invest in anything you want (Target Date Fund, mutual funds, stocks, bonds, REITs, etc). With a taxable brokerage account you have to think about the tax management of any funds you buy or the tax implications of any moves you yourself make. This means things like dividends on stocks or interest on bonds and capital gains will all be taxed.

For short term goals 1-5 years, invest in cash (savings, CD's, money market funds).
For medium term goals 5-10 years, invest in less volatile market products (short/intermediate term bond funds)

I think the problem is that you and your partner need to sit down and discuss things like starting a family, when you want to retire, what you want retirement to look like, what you want your working life to look like, etc. It seems like you need some goals for your money. Have a sit down and dream session together. Make a list of goals, both "crazy" and boring, which one or both of your would like to accomplish. Then prioritize these goals and start saving. Each goal should have a monetary value and a date. Here are some examples:

Pay cash for a car - April 2012 $15,000
Retire @ 60 - June 2014 25x our expenses
Have a baby - December 2012 $10,000
Pay off mortgage - December 2012 $100,000
Trip to Africa - August 2011 $10,000

[BuckyBadger]

I think the problem is that you and your partner need to sit down and discuss things like starting a family, when you want to retire, what you want retirement to look like, what you want your working life to look like, etc. It seems like you need some goals for your money. Have a sit down and dream session together. Make a list of goals, both "crazy" and boring, which one or both of your would like to accomplish. Then prioritize these goals and start saving. Each goal should have a monetary value and a date. Here are some examples:

I think you've hit the nail on the head here. We feel like we are just starting our life, after being in school so long, and we really DON'T know what we want in the future -- except to retire "early" and be able to relax. Thanks for giving me (even more!!) things to think about...