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That's a good point, I hadn't considered that. My 401(k) is actually a Roth 401(k) though so for me it won't make a difference.
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Aug 13, 2011 09:30
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Is there a cut off for tax benefits for TSP contributions for military? I mean after deployments, deductions and other misc tax benefits, my total taxable income last year was 13k. If I contributed 13k to my TSP account, would my federal taxable income be 0, or is there a cut-off somewhere where they still make you pay taxes?
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Aug 13, 2011 21:13
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So I'm just starting off in the Real World, and my company offers a 401K (10% up to 6% of salary). I currently have an Roth IRA that I opened when I was 18, which has about $3000 in it. I am planning to just stop making contributions to my personal IRA, and just max out the matching on my 401K. Does this make sense? Note: my company uses Vanguard for their 401K, and they have a shitload of fund choices so it's not like I would be limiting myself in investment opportunities by focusing on the 401K (not to mention the match makes it seem nicer, too). Also, I would love to have that $3K to invest in other places with (or use in the creation of a safety net) - does it make sense to? I figure that if that money was put into my personal investment account that 3 grand would go a lot farther in the long run (factoring in taking the hit on penalties/taxes now) as opposed to me just leaving it there for the next forty years, without any further contributions. Mr.Brinks fucked around with this message at 21:46 on Aug 13, 2011 |
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Aug 13, 2011 21:44
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Max out the matching, then the Roth. This assumes you have an emergency fund already. If not, you should make one. You can use the Roth to invest in whatever you want; it's a tax qualification more than anything else. If you decide you want to take money out of it, you can remove the principal (but not the earnings) at any time. The only difference between putting it in your personal investment account and your Roth is that you don't have to pay taxes on the money you earn in your Roth (the principal is post-tax though).
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Aug 13, 2011 22:18
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xaarman posted:Is there a cut off for tax benefits for TSP contributions for military? I mean after deployments, deductions and other misc tax benefits, my total taxable income last year was 13k. If I contributed 13k to my TSP account, would my federal taxable income be 0, or is there a cut-off somewhere where they still make you pay taxes? You can only contribute 50% of your income to a 401k (The TSP is essentially a 401k). I can't say for certain if the same restriction applies to military members though. I would ask around on base as I'm sure the people in the Finance office would be happy to help. If you are stuck with the restriction, you can put 6.5 into the TSP and then put 5k into a traditional IRA and roll it into the TSP which would get you to 11.5... not quite 13 but pretty close. It would also buy you the low income retirement contribution credit. It's non-refundable, but it would take out any of the tax liability you could have had and allow all of your refundable credits to pay you (in addition to getting back any and all withholding). Mr.Brinks posted:Also, I would love to have that $3K to invest in other places with (or use in the creation of a safety net) - does it make sense to? Mr.Brinks posted:I figure that if that money was put into my personal investment account that 3 grand would go a lot farther in the long run (factoring in taking the hit on penalties/taxes now) as opposed to me just leaving it there for the next forty years, without any further contributions. An IRA stands for Individual Retirement Account. This means that you, the individual, are free to contribute and direct the investment of the balance. You can contribute $5,000 a year, assuming you make less than ~$105k which will not be taxed when your withdraw it at retirement. You already have the ability to do anything you want with it now. ROTH IRA is simply a tax status. DO NOT TAKE IT OUT OF THAT TAX STATUS! There is LITERALLY NO ADVANTAGE in withdrawing that money. If you take it out, you will have penalties and fees and you will be using up any of your current $5,000 in current year IRA contributions to put it back in somewhere else. If you don't like the company that is administering the IRA and want to move it to vanguard. It's called a roll over and it's as simple as calling Vanguard and asking for help. They will walk you through it. You call some people, sign a paper, super easy. KennyG fucked around with this message at 00:45 on Aug 14, 2011 |
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Aug 14, 2011 00:31
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Eggplant Wizard posted:Max out the matching, then the Roth. This assumes you have an emergency fund already. If not, you should make one. You can use the Roth to invest in whatever you want; it's a tax qualification more than anything else. If you decide you want to take money out of it, you can remove the principal (but not the earnings) at any time. The only difference between putting it in your personal investment account and your Roth is that you don't have to pay taxes on the money you earn in your Roth (the principal is post-tax though). Gotcha, thanks! Very helpful. My long-term concern with the Roth is that within the next five-ten years, I will be making over the income threshold for contributions. Does this matter at all? Also, I've got a good amount of students loans that I thought I could use the funds from the Roth to help pay off. Mr.Brinks fucked around with this message at 01:27 on Aug 14, 2011 |
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Aug 14, 2011 01:22
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Once you go over the income threshold, it's not like they take your account away. It still sits and accrues tax-free earnings. I would hold on to it actually if possible.
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Aug 14, 2011 02:48
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Thanks, sounds like a plan. VVVV I plan on doing that, as the IRA fund is a Vanguard fund. Mr.Brinks fucked around with this message at 04:32 on Aug 14, 2011 |
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Aug 14, 2011 03:43
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Mr.Brinks posted:Gotcha, thanks! Very helpful. It's extra important not to withdraw as you can't put it back in. Make sure you are with a company that doesn't charge you annual account fees. It would make sense to consolidate to the same company your 401k is with (especially since it's Vanguard)
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Aug 14, 2011 04:10
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So what's the best way to invest for a down payment on a house? Is there a special account I can open or something? Anything in particular I should invest in?
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Aug 14, 2011 16:41
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I used a money market fund back but nowadays the returns for everything are so low you might as well just put it in a high yield savings account. Assuming your timetable is short (like, less than 5 years), you don't want to be doing anything risky with the money. I would just stick it in SmartyPig or one of those other savings accounts. I would avoid CDs just in case you want to take the money out a bit early, otherwise you might end up getting penalized for it.
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Aug 14, 2011 16:57
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moana posted:I used a money market fund back but nowadays the returns for everything are so low you might as well just put it in a high yield savings account. Assuming your timetable is short (like, less than 5 years), you don't want to be doing anything risky with the money. I would just stick it in SmartyPig or one of those other savings accounts. I would avoid CDs just in case you want to take the money out a bit early, otherwise you might end up getting penalized for it. If you've got a few years, you can afford to take a bit of risk. Short-term debt is yielding at least a bit better than money market funds, something like VFSTX may be a good bet - yield of 1.5% with only 2.2 years duration so swings in interest rates won't kill you. And since it's a taxable account, municipal bonds maturing when the house will be bought are a reasonable if slightly riskier option, and can probably pull 3% or so tax-free.
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Aug 14, 2011 19:22
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waloo posted:Given that I have basically zero AGI on account of living abroad, is there any special thing that I should be looking at instead? What other gotchas might I be missing on account of being abroad? There's the "kick in the rear end tax," part of the HEART Act, if you ever try to expatriate and have significant assets ($2MM or average income of $139k/year for past 5 years). IRS basically assumes you expatriate for tax avoidance... and they're probably right.
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Aug 15, 2011 08:37
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moana posted:I used a money market fund back but nowadays the returns for everything are so low you might as well just put it in a high yield savings account. Assuming your timetable is short (like, less than 5 years), you don't want to be doing anything risky with the money. I would just stick it in SmartyPig or one of those other savings accounts. I would avoid CDs just in case you want to take the money out a bit early, otherwise you might end up getting penalized for it. I actually think that can be too conservative. If inflation is over 1%, you're technically losing money having it in a high yield savings account. I would say if you have some emergency money put aside, you can look at some of the bond funds. Both Vanguard and Fidelity have some nice ones that are fairly consistent over the past decade. The only problem came in 2008 and they recovered rather quickly. I guess I think the upside on those is worth more than the incredibly slim chance that they fall at exactly the time they decide to buy a home. And even if that happens, it likely won't take a big chunk out of it and they can just hold tight till it passes.
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Aug 15, 2011 08:55
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Niwrad posted:I actually think that can be too conservative. If inflation is over 1%, you're technically losing money having it in a high yield savings account. What upside on these bond funds are you talking about? You have to look at current yield, not the performance of the last decade, a decade that experienced dramatically declining yields. With stocks, past performance is no guarantee of future performance due to uncertainty. With bonds, that past performance will not equal future performance is written in the contract (other than the effect of interest rate fluctuations at the end of your holding period). Some current yields: Short-Term Treasuries: 2.2 year duration. Yield: 0.25% Short Term Bond Index: 2.6 year duration. Yield 0.71% Short-Term Federal: 2.2 years duration. Yield: 0.66% Short-Term Investment Grade: 2.2 years duration. Yield: 1.55% High Yield Savings are yielding 1.1% and highly liquid. And they are FDIC insured. With bonds, you'd need to take some credit risk and interest rate risk just to eek out an extra 0.45% of interest. If you opt for safety in bonds, you are earning less money than the high yield savings account. In fact, the above yields tell you something else. The small-fry investor actually has an advantage over institutional investors (a rare time indeed). The former can stay within FDIC insurance limits to take advantage of yields that are higher than comparable risk publicly traded assets. These comparable risk assets would be T-bills and commercial paper which is yielding 0%. If the investment managers out there were able to invest in ING or SmartyPig and Alliant Credit Union and stay within FDIC or NCUA limits, they would pile in. That tells you something. To willingly join the institutional players at a time when they are disadvantaged would be a foolish thing to do for your emergency money or other money you need in the near future. Want to reach longer in the yield curve? 5-year TIPS is yielding -0.95% (yes that is negative) so you are guaranteeing a negative real return with a 5 year bond. If you go to the Intermediate-Term Bond Index, you can get 2.56% yield, but you are bearing interest rate risk at 6.4 year duration as well as credit risk. This is too much risk for short-term money, and for only a 1.36% upside. Looking at the yields and the duration, where is the obvious solution that gives you a return above inflation with protection of principal? There is none. The answer should have been 5 year TIPS, but when that is yielding negative, that tells you something about today's investment environment. None of this changes the necessity of CASH for liquidity and protection of capital. Chasing yield because you are afraid of losing money to inflation is today's herd behavior that you want to avoid. AreWeDrunkYet posted:If you've got a few years, you can afford to take a bit of risk. Short-term debt is yielding at least a bit better than money market funds, something like VFSTX may be a good bet - yield of 1.5% with only 2.2 years duration so swings in interest rates won't kill you. And since it's a taxable account, municipal bonds maturing when the house will be bought are a reasonable if slightly riskier option, and can probably pull 3% or so tax-free. You'd need to go with Intermediate-Term munis (see the Vanguard one) to get 2.64% and at a 5.7 year duration. And the muni market can suffer liquidity risks that result in sudden rise in yields. Not an easy risk to bear with down payment money, IMO. 80k fucked around with this message at 19:11 on Aug 15, 2011 |
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Aug 15, 2011 17:40
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I see a lot of invest in your 401k/457 or whatever up to the highest match, and then contribute what you want from what's left in to a Roth or something similar. What if you work for an employer that has a 401k/457, but provides no match whatsoever. Is it even worth participating, and should one just dump the same money in to a Roth or something else? I've got a 401k through work that is run by icmarc. I have no match or employer contributions to the account. Is it just more worth it to take my contribution (10% of salary) in my taxable paycheck, and then forward it to a Roth? The plan I have through icmarc isn't too bad, and they have a horizon retirement plan that I have selected. Although I don't know much more about the reputation or fee structure of the company. They tell us at work that they will eventually start to contribute to employee retirement accounts a certain amount again when the economy turns around, although who knows when that might happen.
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Aug 15, 2011 21:17
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I max out my Roth IRA each year and contribute roughly 25% of my post tax income to my 401k (TSP). I do not get any match from my employer. 25% of my income should put me roughly maxing my 401k every year. Should I consider doing something else with my 401k money?
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Aug 15, 2011 22:50
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agentq posted:I max out my Roth IRA each year and contribute roughly 25% of my post tax income to my 401k (TSP). I do not get any match from my employer. 25% of my income should put me roughly maxing my 401k every year. Should I consider doing something else with my 401k money? As long as your goal for that money is retirement, where it is now is about as good as you can get.
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Aug 15, 2011 23:21
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80k posted:What upside on these bond funds are you talking about? You have to look at current yield, not the performance of the last decade, a decade that experienced dramatically declining yields. With stocks, past performance is no guarantee of future performance due to uncertainty. With bonds, that past performance will not equal future performance is written in the contract (other than the effect of interest rate fluctuations at the end of your holding period). Thanks for the response. Doesn't the NAV have to factor into your returns too? I have some money stashed in the following. Fidelity Total Bond Fund (FTBFX) http://fundresearch.fidelity.com/mutual-funds/summary/31617K881 Fidelity Ginnie Mae Fund (FGMNX) http://fundresearch.fidelity.com/mutual-funds/summary/31617K105 There are some others, but I'm wondering what the disadvantage of putting money into something like this is. The Ginnie Mae has been consistent for a long time and didn't even take much of a hit during the financial crisis. There doesn't seem to be a whole lot of risk in the short term until interest rates rise. I guess my question would be, wouldn't they be better off putting it in a couple funds like that which can earn them 5%+ while they continue to save for their home?
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Aug 15, 2011 23:42
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I work for a TN county which is part of the Tennessee Consolidated Retirement System. I was under the impression it was limited in the total payout, however according to the TCRS newsletter it's a lifetime benefit.quote:Upon meeting the Am I reading that correctly or am I misunderstanding what "lifetime benefit" actually means? It's not like it's a massive amount, the more conservative numbers I used put it at around $2000-$2500 a month at retirement so I suppose it would make sense. Not that it matters, it will be destroyed exactly 1 day before I retire in 2050 and I'll lose all the money I put in. 
Yaos fucked around with this message at 23:56 on Aug 15, 2011 |
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Aug 15, 2011 23:51
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Untagged posted:I see a lot of invest in your 401k/457 or whatever up to the highest match, and then contribute what you want from what's left in to a Roth or something similar. What if you work for an employer that has a 401k/457, but provides no match whatsoever. Is it even worth participating, and should one just dump the same money in to a Roth or something else? It's not really worth participating if they don't contribute anything. Most company plans have limited fund options available and often with higher expense ratios. You'd have much more versatility opening it on your own at Vanguard or Fidelity. The initial question is whether you want to go the route of a Roth. You'll have to pay the taxes on your income now, but everything it makes over the years will be tax free. As opposed to your current 401k where you're having the contribution taken out pre-tax. If you are relatively young and not in a high tax bracket, I would max out the Roth. It also can work as a savings account in case of emergency as you can take out the principle without penalty. You'll have to pay some more in taxes right now, but it'll pay off down the road. I would stop having them take money out and open up your own Roth through Vanguard or Fidelity. Max out your contributions on your own (you can setup a monthly payments). If you want to put more away for retirement, you can open a Traditional IRA with them as well and make contributions (of which you'll receive deductions for on your tax return). In a nutshell, there is really no advantage to using a company plan unless they are contributing something.
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Aug 15, 2011 23:56
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Yeah, but 401ks are the only other way to get tax sheltering other than an IRA. Even if the plan is bad, you still get the tax shelter benefit and after you leave that job you can just roll it over wherever you want. I would contend 5-10 (or more) years of lovely expense ratios + the tax benefit is greater than better expense ratios in a taxable account for that same period. I suppose some quick math could be done to figure out the length of time at job cutoff for the 401k to make sense, but I have a feeling it would be a pretty decent length of time.
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Aug 16, 2011 00:05
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Niwrad posted:Thanks for the response. Doesn't the NAV have to factor into your returns too? I have some money stashed in the following. Maybe if you understand the bets you are making. Look, a bond has set terms, with a maturity date and set coupons. With GNMA's and some corporates, add into the equation prepayment/extension risks. So you better have a reason to expect NAV changes to work in your favor. GNMA's are even more problematic because you do not even know what the duration is as the duration will change based on interest rate conditions (if interest rates rise, the duration will increase as homeowners will choose not to prepay their mortgages at the rate that the holders of the bonds initially expected). So there is no way to measure the risks you are bearing over the short-term. There was no reason for GNMA's to plummet during the 2008 financial crisis because it benefited from the flight to safety similar to treasuries. Again past-performance during a period of time of declining rates and flight to safety, and a period where the option-adjusted-spread of GNMA's was rewarded is a terrible way to guess future performance. Also, the option-adjusted-spread (the premium you earn for the prepayment/extension risks) is tiny because the bond market has been spoiled by declining rates. If inflation fears hit the bond market, an intermediate duration GNMA can theoretically go out to 20+ years (I think the Vanguard GNMA is positioned for a maximum duration of 15 years) which can make losses on a short-term investment substantial. And even before interest rates rise, the fear of rising rates can drastically increase the option-adjusted-spread over equal duration treasuries, giving a substantial hit to NAV. There are features to bond funds that many have forgotten because we have been in a multi-decade long bond bull market. Niwrad posted:I guess my question would be, wouldn't they be better off putting it in a couple funds like that which can earn them 5%+ while they continue to save for their home? With the Vanguard Intermediate Term Bond index yielding 2.56% yield on a 6.4 yr duration, what bet are you making that allows you to expect 5+ returns going forward? OK, if interest rates drop by 40 basis points per year over the next couple year, your NAV rise and interest earned will gain you 5% per year if you get out after the second year. Is that what you are basing your expected returns off of for a short-term investment? And also ignoring the possibility that longer term rates will rise, easily wiping out any additional yield you are earning? Look, remember who you are giving advice to. Is the average joe going to understand the risks of bond funds when the advice is "check out some bond funds"? And even if you stick with the safer bond fund choices, the current yield is actually less than high yield savings accounts.
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Aug 16, 2011 00:28
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80k posted:And even before interest rates rise, the fear of rising rates can drastically increase the option-adjusted-spread over equal duration treasuries, giving a substantial hit to NAV. There are features to bond funds that many have forgotten because we have been in a multi-decade long bond bull market. Wouldn't the hit to the NAV be partly negated by the rise in yield? Your information is really informative and I appreciate you taking the time to explain it. I guess I'm looking at a fund like the Ginnie Mae which seems to be able to provide returns or at least mitigate losses even when interest rates rise. I look at something like this and figure it would be worth the risk. FGMNX Groth
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Aug 16, 2011 01:14
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Niwrad posted:Wouldn't the hit to the NAV be partly negated by the rise in yield? Not exactly. The hit in NAV is actually meaningless if you hold the securities to maturity since the original terms have not changed, provided there is no default (this is partly theoretical since bond fund managers ride the yield and have high turnover and so there is no maturity date per se). The part that the rise in yield is beneficial is that you can reinvest your coupons into new issues that will give you higher expected returns, which essentially improves your longterm returns. But that is why these funds are more suitable for longterm investments, and not for downpayment money. An individual bond approaches a duration of zero as it gets closer to maturity which means you can match your cash flow needs with a ladder of bonds or CD's. A bond fund rides the yield and never approaches maturity as bond managers buy and sell to maintain their mandate. Another reason why bond funds can be problematic for short term investments. You are exposed to the same duration risk on the day you withdraw as you are on the day you invest, which is not true for individual bonds that are redeemed at maturity.
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Aug 16, 2011 01:38
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zmcnulty posted:There's the "kick in the rear end tax," part of the HEART Act, if you ever try to expatriate and have significant assets ($2MM or average income of $139k/year for past 5 years). Haha thanks for the reply and it seems I certainly don't have those to worry about, neither having that much money nor planning to expatriate. But since the Roth IRA is out and as far as I know I don't have any employer-related anything, what is there for me to do in terms of contributing towards retirement? Just buy some indexes and hold indefinitely?
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Aug 16, 2011 02:09
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Eggplant Wizard posted:Once you go over the income threshold, it's not like they take your account away. It still sits and accrues tax-free earnings. I would hold on to it actually if possible. What he said. Also, effectively Roth IRAs have no income based limit, since if you do go over the income limit you can just contribute to a traditional IRA and convert it to a Roth like, the next day with no penalty. Some restriction exist to this regarding having other investment accounts but I don't remember them off the top of my head and they are pretty obscure.
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Aug 16, 2011 02:34
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spandexcajun posted:Also, effectively Roth IRAs have no income based limit, since if you do go over the income limit you can just contribute to a traditional IRA and convert it to a Roth like, the next day with no penalty. This is kind of surprising, and it seems to violate the spirit of the income limits for Roth IRAs. Can you tell me more about this? Have you spoken to a tax professional about this? In particular, page 59 of this IRS document seems to suggest that any rollovers are treated as income for the purpose of contributions. El_Elegante fucked around with this message at 06:06 on Aug 17, 2011 |
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Aug 17, 2011 05:59
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El_Elegante posted:This is kind of surprising, and it seems to violate the spirit of the income limits for Roth IRAs. Can you tell me more about this? Have you spoken to a tax professional about this? It was part of the Bush Tax Cut extensions in 2006. Basically since they were cutting revenue so much, they needed some things to not make it look as bad on the short term. So they figure people would convert their traditional IRA to a Roth and it would bring in some short-term revenue. Of course, long term it sort of fucks over the country.
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Aug 17, 2011 06:24
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El_Elegante posted:This is kind of surprising, and it seems to violate the spirit of the income limits for Roth IRAs. Can you tell me more about this? Have you spoken to a tax professional about this? Well, it's not a rollover it's a conversion. This is definitely a loophole in the traditional sense. It is however quite legal (IANAL) so take advantage if you need to. Wealthier people really do have a lot more advantages then the poor / middle class. I remember how I could not believe that there was a limit on social security tax, this seems crazy to me but that's how it is.
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Aug 17, 2011 16:57
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That is crazy, and is certainly worth talking to a professional over once I hit the income limit (not soon).
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Aug 17, 2011 17:43
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Yeah but if you are making enough that you don't qualify for a Roth, why would you necessarily want to pay your taxes now, instead of later? Unless you think you are going to make even more money later? I guess it would be a speculative play on taxes going up in general, though.
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Aug 17, 2011 19:13
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abagofcheetos posted:Yeah but if you are making enough that you don't qualify for a Roth, why would you necessarily want to pay your taxes now, instead of later? Unless you think you are going to make even more money later? I guess it would be a speculative play on taxes going up in general, though. If you're living in a low or no tax state (e.g. Texas) and might want to retire to a high tax state (California).
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Aug 17, 2011 19:23
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abagofcheetos posted:Yeah but if you are making enough that you don't qualify for a Roth, why would you necessarily want to pay your taxes now, instead of later? Unless you think you are going to make even more money later? I guess it would be a speculative play on taxes going up in general, though. 1) make enough that you don't qualify for a Roth, you probably (hopefully?) 2) maxing your 401(k). So you are paying taxes on the money now regardless.
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Aug 17, 2011 20:46
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gvibes posted:If you: And if you do not qualify to make deductible Traditional IRA contributions (and hence are making a non-deductible Traditional IRA contribution) and do not have other Traditional/SEP/Simple IRA assets that commingle during the conversion process, then this is essentially a backdoor Roth.
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Aug 17, 2011 20:53
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alreadybeen posted:If you're living in a low or no tax state (e.g. Texas) and might want to retire to a high tax state (California). Or if you're relatively young and that money will make a lot more over it's lifetime in the Roth. I'd be curious to see if there is any data showing when you shouldn't contribute to a Roth. Either what tax rate you'd have to be at or age. Assuming you're investing your Roth in something that brings an average rate of return.
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Aug 17, 2011 23:51
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So I'm a 24 year old that started working full-time about a year ago. Right now I'm contributing to both my company's 401K (at 8%) and Roth 401K (7%). I don't receive a match, however my company contributes X number of dollars according to the profits for that year. Additionally I am looking into Roth IRAs so I'm planning to open one up with Vanguard. So two questions: Right now I'm not projected to max out my 401K+Roth 401K, so should I look to do that first? Or should I change my salary allocation from either the regular 401K or Roth 401K to the Roth IRA? Roughly speaking I should be able to come close to the Roth IRA max if I contribute at around 8-10% with an initial deposit of $1000.
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Aug 18, 2011 17:51
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Niwrad posted:Or if you're relatively young and that money will make a lot more over it's lifetime in the Roth. I'd be curious to see if there is any data showing when you shouldn't contribute to a Roth. Either what tax rate you'd have to be at or age. Assuming you're investing your Roth in something that brings an average rate of return. may be because dropping 5000 from your income will save you ~2000 from you income tax, so it would be as if you instantly deposited 7000 toward retirement (and as long as you withdraw a sane amount or do the conversion you are golden.
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Aug 18, 2011 18:30
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Hi finance goons! Let me just give you a run-down of my situation and see what y'all think. I'm a 25 year old community college teacher. I will most likely be in education the rest of my life. I'd like to retire around 55, which means 30 more years to save. I think I need to get on it. Please don't quote sensitive information from this post. I am going to edit it out later.  I have a few savings systems: - Livestrong 2045 IRA from American Century with $9,800 in it. I put $400 a month in this, totaling $4,800 a year. - Ginnie Mae account from American Century with $17,600 in it. This is sort of my general savings account. For example, I used some of it to buy a car a year ago. I'm kind of bookmarking this for a house down-payment in the next five years, but I don't know if that's a bad idea or not. - Employer savings program (Teachers Retirement of Texas) with $4700 in it. 6.25% of my paycheck, or $224, is transferred to this every month, totaling $2688 a year. This account earns 5% interest every year, and it can/will be rolled over to my IRA when I leave Texas. The IRA is non-negotiable. I have that automatically deducted from my checking account a day after my direct deposit hits so that it always gets paid. The employer savings program is mandatory, but I don't mind that. I wish it was a matching program, but the only way to get the matching is to retire from this institution, which I'm not going to do. So that leaves the Ginnie Mae. I stick money in this account when I have extra. Usually this means a few rather big deposits each year. I'd like to get on a more rigorous savings program ($X per month) but my expenses fluctuate a fair amount and I'm planning a large move in my future, which will upend things at that point anyway. (Once I get settled I might contact Pillowpants about setting up a plan.) I've removed money from it when I really needed it (unemployed, wrecked my car, etc), but I try not to. Should I open up another savings account for my future house fund? Is a Ginnie Mae a good retirement option anyway? The value goes up and down depending on the market, but I don't know enough about it, really. Other info: I live with my boyfriend, and we plan to get married at some point in the next few years. He's a federal employee and has his own savings plan in place. He is very financially responsible, but we will most likely keep separate finances throughout our marriage. We don't at this point plan to ever have children, we would like to own a home, and ideally we'd like to retire around the same time, approximately at 55. If you were in my shoes, what would you do? Edit: I don't have any debt or loans and neither does the boyfriend. Betazoid fucked around with this message at 23:45 on Aug 18, 2011 |
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Aug 18, 2011 23:41
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Betazoid, read the last few posts I made on Ginnie Mae's, particularly this one. They are not a great idea for general savings or house down payment money. They are backed by the US, and so are guaranteed, but there is significant price risk due to the unique features of GNMA's that result in shifting maturities. The last few posts I made probably discuss more about it than you ever care to know. I'd use a high yield savings account like ING, American Express bank, or Alliant Credit Union for an emergency fund and house downpayment. And then build a diversified portfolio in a Vanguard IRA starting with one of their Target Retirement funds and splitting into separate funds if you ever care to learn more about investing (this is optional).
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Aug 18, 2011 23:48
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