- August 8, 2023
- Posted by: legaleseblogger
- Category: Related News
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Financial Overview and Concerns
Income:
I am currently earning $200,000 per year, while my wife’s income amounts to $180,000 annually. Our combined income provides us with a stable financial foundation.
Mortgage:
We currently have a mortgage of $500,000 at an interest rate of 2.75% for a 30-year term. The mortgage represents a significant portion of our financial obligations.
Retirement Savings:
I have diligently saved approximately $400,000 in my 401k account, which serves as a retirement plan. However, I am unsure about the extent of my wife’s retirement savings.
Savings Account:
We currently possess $125,000 in a savings account, which is a significant amount of idle cash. However, merely keeping it in a savings account may not be the most advantageous strategy in terms of long-term growth.
Stock Market and Investments:
Given the current market conditions, I am skeptical about investing our savings in the stock market. The volatility and uncertainty make it a risky endeavor that I am unwilling to take at this moment.
Alternative Investment Strategies:
In search of safer investment options, I considered moving some funds to a Certificate of Deposit (CD). However, the meager $50 return on my investment hardly seems worthwhile. I also contemplated investing in Treasury Bills (T-Bills) which offer minimal interest rates. Nevertheless, the complex processes involved in acquiring and managing T-Bills seem burdensome.
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I’m a bit confused.
The stock market is too risky, but you also believe interest rates north of 5% on CDs and T-bills isn’t worth it?
What exactly are you looking for?
>Stock market seems risky right now.
Well thankfully, that doesn’t matter because investment returns are over a longer period than “right now”. I don’t even want to do the math on how much you’ve lost parking it in a savings account. Lucky for you, you can open up an investment account today and get that money working for you.
Good lord. If you had put the $125k in VOO at the beginning of this year it would be up like +15%.
Judging by your answers and lack of investment knowledge (which is fine and
I am not shaming) you would be a very good candidate for a financial advisor. They can help allocate and invest your money in the most tax efficient way while getting a good return. Make sure you use a fiduciary and you are happy with the advisor before working with them.
50$? What type of CD are you investing in? There are plenty of CDÔÇÖs paying 5% right now. Hypothetically, if you locked up your 125K in a 12 month CD paying 5%, this would net you $520~ a month.
Dollar cost average into index funds and/or Roth over time. The market always seems risky to some.
What 50 dollars? I make more than 229 per month on my T bills and it is not an hassle just get it through Vanguard or fidelity, I also make 797 per month in no penalty Cds plus and 788 per month on HYSA. I think totaling 1814.00 per month on these safer options. I know this money should be in a long term investment but While WeÔÇÖre figuring out it needs to make money at least.
You need to learn more about investing. I highly recommend reading The Simple Path to Wealth by JL Collins.
Investing in the stock market should be done consistently over decades, whether the market is currently ÔÇ£upÔÇØ or ÔÇ£downÔÇØ. Short term fluctuations are irrelevant. Park your money in low cost, total market index funds and DONÔÇÖT TOUCH IT.
Is your 401k already invested in the stock market?
This $125K would be your emergency fund if you want liquidity and no market fluctuations.
Therefore, invest it in a HYSA. Should be able to get 4.5% in a HYSA now and that would be about $460 a month in interest.
The key point, since it’s your emergency fund, it’s not supposed to make a high return.
If you want high returns, then you have to accept the risk of the market and commit to a 5+ year holding period in case there’s a downturn.
Not sure what your bills are but you should be keeping 3-6 months(up to 12 if conservative) of living expenses in something liquid(CD, HYSA). Invest the rest.
VOO is an index fund with Vanguard. It follows the Standard & Poor 500 Index. An index is a list of companies. This particular list is the top 500 largest companies in the US.
VOO is a very popular fund. It has a low expense ratio.
Safest way is to:
Keep 25k on a big bank checking/saving account that you already have and trust and can get the money anytime you want, emergency fund.
Put $50k to a HYSA that gives 4% plus such as SOFI or Discover or Citi, they are all well known FDIC insured and you can get money in and out just as fast as Chase or WellsFargo or BOA. When the interest rate goes down, you know itÔÇÖs time to put your money back to a SP500 index fund or ETF. You getting around $165 per month pretax
The remaining $50k put on a 6 to 12-month CD that yields 3%+, getting $125 per month pretax
For me, IÔÇÖd put $100k to a brokerage Fidelity to earn 4.7% (going to 5 soon) automatically by having money there and get ready as soon as SP500 pulled back 5-10% in Aug/Sep, you can put all in a SP500 index/ETF
Not saying you lied but how did your 401k go up 20% per year Lol did your 401k platform offer TQQQ?
125 and you want to keep 40 liquid.
Go to treaury direct and open an account.
80k here’s what I’d do.
8 week t bills. I did 25k in my figures. once a month with 25k at last weeks auction (new numbers will be out later today) is $205 every 8 weeks. bump that to 50k and 410 a month. Interest rates stay high for 6 months, that 2,400.
You’ve got you 45k immediate liquid, and another 50k. If you want it more liquid (a little riskier on interest rate), you can do what I’ve done. I’ve laddered 8 week t-bills. I have one maturing every week, set for 6 automatic re-invest. You just have to decide by Tuesday if you want to take the re-invest off. (by Tuesday I mean the Tuesday (might be Wednesday) before the auction. The Thursday Auction sets the rate for the T-bills, then the buy of them is the following Tuesday).
Now say you did the 25k in an 8 week. On the maturity date, if you are set to re-invest. You’d have the $204 depositing into the TD account OR into your bank account.
CDs are over 5% right now, unless you are only putting in $1,000 you should be doing much better.
I will assume you have an emergency fund: 4-6 months worth of non-discretionary expenses. After that you can take some risk in investing. You can be conservative if you like, but the returns will be less. 125k in your cash account is effectively losing 3-4% due to inflation. Put that money to work. Even a simple S&P index fund would be up about 8% YTD.
You can do a CD Ladder, where you spread some money across a 3- 6- 9- and 12-month CD and roll it every 3 months. This keeps you fairly liquid and as I mentioned, CD rates are 5.25 to 5.45% depending on your time horizon.
You both make too much for a ROTH, but you can look at utilizing cash value life insurance as a substitute. Many will poop on this idea, which is fine, but it is similar to a ROTH: you put money in post-tax and it comes out tax free when you need it – and it has the added protections of death benefit for your spouse and family needs.
Long term planning, think of maybe a protection annuity. You can take a portion of your investments, let it have some exposure to the market but also have some protection on the downside. I know my last two suggestions will be lambasted with the “Advisor just wants to make a commission” argument but that’s how an advisor makes their money. And done right it costs YOU nothing compared to the time of managing it yourself or what it would cost to have someone else manage it for you.
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Find an advisor that works for you. Meet a couple. speak with your friends who have an advisor – you’d be surprised to learn some things you aren’t looking at.
Edit: Clarity and typo
Stocks that pay a dividends, like any on the S&P 500, or a mutual fund that tracks the. S&P 500. The return will be around 10%, but reliable.
What is your time horizon and risk tolerance?
Not sure if your savings account is considered “high-yield” but I recently transferred all of my savings to Marcus Online Savings and I’m extremely pleased with them. I started at 3.85% APY in February and they’ve increased it twice since then. I think it’s at 4.15% APY today.
Edited to add: transferring to and from my primary Chase Checking account is super easy and fast, too. The disclaimer says a transfer will take 1-3 business days, but I’ve never had it take longer than 4 hours or so.
IMO depends entirely on time horizon (more specifically than age, as some folks at a given age have radically different time horizons on when they need/want that money). I personally think for long term equities are the time proven vehicle, although there can def be a case made for diversification in other assets (home, real estate, bonds, etc.), but then again if you’re in the position where you have more than adequate cash flow for ongoing needs and are really stretching out the time horizon then really leaning into equities is the way I’d go.
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VMFXX – Money Market, current yield over 5%.
Or if youÔÇÖre a long term investor, Index fund. You have strong savings, and strong cashflow.
If you lose 20%, youÔÇÖre fine with cashflow. You could not touch it for 5 years and be fine – Index fund. Typically available within a couple days, very liquid.
Ideally you would take 6 months of expenses, and put it in an online savings account paying 4-5% interest. Marcus by Goldman Sachs is well-known and FDIC insured and pays 4.25% on the savings account.
The rest, assuming youÔÇÖre not planning to need it in the next couple of years for something like a house downpayment, I would put into the market. ItÔÇÖs the best place for your money long-term. You can open a brokerage with Fidelity or similar.
You didn’t say the most important part for investing: how old are you?
High yield savings. In case of crisis (layoff or something) thatÔÇÖs probably a good stash to have liquid.
Depends what you want to do with it, and more specifically when. If you expect to use it in <5 years, something like a CD is fine. Or perhaps a bond mutual fund. For >10-15 years, a stock index fund makes sense. If your time range is in between, you might want to split it up.
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What the heck is the 400k in your 401k invested in if not the stock market?
Also how risky the stock market seems now is irrelevant to longterm retirement strategy.