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I have a savings plan with my pension and when I'm 50 I'll have to take back my contributions (about 160k) but would like to roll over the interest (should be about 250k) into an IRA or other approved retirement fund until I'm 59 1/2. Otherwise I would just cash out the interest but I would have to pay 20% capital gains.
So I figure why not let it sit somewhere for 10 years and make more money.
My question is...what is the safest way to invest? I don't want to lose the principal 250k.....there's no way to guarantee that I'm assuming? If the market crashes I could lose some of the principal right?
But if it averages 8% it could be worth 539k when I'm 60
I have a savings plan with my pension and when I'm 50 I'll have to take back my contributions (about 160k) but would like to roll over the interest (should be about 250k) into an IRA or other approved retirement fund until I'm 59 1/2. Otherwise I would just cash out the interest but I would have to pay 20% capital gains.
So I figure why not let it sit somewhere for 10 years and make more money.
My question is...what is the safest way to invest? I don't want to lose the principal 250k.....there's no way to guarantee that I'm assuming? If the market crashes I could lose some of the principal right?
But if it averages 8% it could be worth 539k when I'm 60
Like mathjak said, that is not possible.
The next best would be to reach for yield in preferred stocks, put some money in reasonably valued steady eddie stocks like Berkshire Hathaway, and the rest in government bonds of intermediate maturity.
Your losses, if any, should be minimal. But there are no guarantees.
I might just cash it out then at 50 and pay the 20% capital gains....
PLUS the (15-20-percent) taxes, PLUS the (10-percent) penalty for a pre-59-1/2 withdrawal! Probably not the best idea. Why not simply do a roll-over into a self-directed IRA investment account?
PLUS the (15-20-percent) taxes, PLUS the (10-percent) penalty for a pre-59-1/2 withdrawal! Probably not the best idea. Why not simply do a roll-over into a self-directed IRA investment account?
I'm pretty sure there would only be 20% capital gains as the contributions are after tax
Most of us are not tax-professionals, so a disclaimer is essential. That said, are there not two separate issues here? One is a general investment question... What is "safe", what is risky, what sorts of average annual return is reasonable to expect; the other question is about defined-contribution pensions and what to do with them.
For the first question, there's lots of amusing (and occasionally informative) discussion in these very threads. But for the second question, isn't the better source the employer HR department? As a most basic point, is there the option to do nothing - to not move the account anywhere? That may be the safest approach.
You can do almost kind of investment you want in your IRA .
Bonds - Sure
Bond Funds - Sure
Investment warning:
Interest rate are at a all time low. If/When Interest rates go up. The Value of your Bond(s) go down. To Sell them, you have to Pay the difference between the interest rate on the bond and the current interest rate to get someone to buy them.
Why would anyone want to buy the 3% Bonds you have now, When the bonds a few years from now are paying 6%, they won't. You have to "Give" (Sell @ a discount) the 3% off the face value of bond to make it a 6% to get anyone to buy it.
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