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What to do with Savings?
Posted on 11/7/12 at 11:36 am
Posted on 11/7/12 at 11:36 am
Let's not discuss right and wrong, jut what to do if I think I'm right.
Assets
1) Retirement saving in MMA. (Rolled from stocks last winter.)
2) Personal savings half stocks, half MMA. I basically switched additional savings from stocks to MMA 18 months ago or so.
Debt
1) A recently-purchased house with a 20 year, 2.75% note. 80% borrowed, the rest paid cash.
2) No cc or car loan. I'm an MT Baller
.
Last winter, I wanted to be less in stocks because it felt like 2008 all over again. Well in 2008, the stock market started its turnaround in Jan of 2009. I see 3 options:
1) Roll retirement savings back to stocks over the next 3 months. Personal savings in MMA to stocks over the same period.
2) Leave retirement in MMA, use savings in MMA to pay down house, even though it's on 2.75%. That's an ungodly low rate, but the MMA is paying less.
3) A combination of the 2 above.
4) Something else.
My rainy day fund is plenty sufficient. What is your advice?
Assets
1) Retirement saving in MMA. (Rolled from stocks last winter.)
2) Personal savings half stocks, half MMA. I basically switched additional savings from stocks to MMA 18 months ago or so.
Debt
1) A recently-purchased house with a 20 year, 2.75% note. 80% borrowed, the rest paid cash.
2) No cc or car loan. I'm an MT Baller
. Last winter, I wanted to be less in stocks because it felt like 2008 all over again. Well in 2008, the stock market started its turnaround in Jan of 2009. I see 3 options:
1) Roll retirement savings back to stocks over the next 3 months. Personal savings in MMA to stocks over the same period.
2) Leave retirement in MMA, use savings in MMA to pay down house, even though it's on 2.75%. That's an ungodly low rate, but the MMA is paying less.
3) A combination of the 2 above.
4) Something else.
My rainy day fund is plenty sufficient. What is your advice?
2
Posted on 11/7/12 at 12:54 pm to Cold Pizza
Put your savings (and emergency fund too) to a Roth. You can always get the money back out with no penalty and your earnings are tax free.
I would not prepay a mortgage note with a rate that low. Your ROI is negative after inflation and taxes. It's true that an MMA is paying less, but I bet it won't be for the next 20 years. Assuming you're in the 25% tax bracket prepaying your mortgage = investing for 20 years at a 2.1% rate. Take inflation into account and that's a negative real return, guaranteed for 20 years (or until the mortgage is paid off).
I would consider getting a credit card, most will give you rewards of some kind and if it is stolen your liability is limited. Just pay it each month and you're fine.
I would not prepay a mortgage note with a rate that low. Your ROI is negative after inflation and taxes. It's true that an MMA is paying less, but I bet it won't be for the next 20 years. Assuming you're in the 25% tax bracket prepaying your mortgage = investing for 20 years at a 2.1% rate. Take inflation into account and that's a negative real return, guaranteed for 20 years (or until the mortgage is paid off).
I would consider getting a credit card, most will give you rewards of some kind and if it is stolen your liability is limited. Just pay it each month and you're fine.
Posted on 11/7/12 at 1:36 pm to foshizzle
quote:
I would not prepay a mortgage note with a rate that low. Your ROI is negative after inflation and taxes. It's true that an MMA is paying less, but I bet it won't be for the next 20 years. Assuming you're in the 25% tax bracket prepaying your mortgage = investing for 20 years at a 2.1% rate. Take inflation into account and that's a negative real return, guaranteed for 20 years (or until the mortgage is paid off).
That's a very good point. What's the max ROTH IRA contribution? $5k/yr?
Posted on 11/7/12 at 4:13 pm to Cold Pizza
Posted on 11/7/12 at 10:51 pm to Cold Pizza
Seems like your not in drowning in debt and have a fully funded emergency fund (min 6 months of expenses). Congrats you're better off than the average person. My suggestion would be in the following order: 1. Max 401k to get max employer match 2. if your MGAI allows you to qualify max roth ira 3. max yearly 401K limit 4. any $ left over invest in taxable account or IRA if you qualify for contribution deduction.
Personally if I were you I would not worry about trying to pick individual winners and losers with stocks. Pick a low cost index fund/etf paired with a low cost index bond fund/etf and stick to your plan!
Personally if I were you I would not worry about trying to pick individual winners and losers with stocks. Pick a low cost index fund/etf paired with a low cost index bond fund/etf and stick to your plan!
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