What to do with $20K?

[Qwerty]

I would put it into mutual funds, but not tie it up into a "retirement" account like a IRA. It would then do double duty as invested accounts for retirement but still be liquid if your 6 month emergency fund isn't enough. If you have access to an HSA health insurance account, I would max out your contribution for that first though, and possibly use the dividends each year to add to that account as well.

[michgc]

Originally Posted by Qwerty

I would put it into mutual funds, but not tie it up into a "retirement" account like a IRA. It would then do double duty as invested accounts for retirement but still be liquid if your 6 month emergency fund isn't enough. If you have access to an HSA health insurance account, I would max out your contribution for that first though, and possibly use the dividends each year to add to that account as well.

If he puts it into a Roth IRA, the contributions wouldn't be tied up, and he can use it if necessary.

[Qwerty]

Originally Posted by michgc

If he puts it into a Roth IRA, the contributions wouldn't be tied up, and he can use it if necessary.

Then just put the funds into a savings account if you only want access to the original 20K....but as salaries grow, expenses grow, your emergency fund needs to grow, thus, putting it into mutual funds not locked into a retirement account.

[galaxyhi]

The advice above is all good depending on your situation.
Madmoney has good ideas.
If it were me, I'd bulk up the E- account first, you own a home and repairs can run easily to 10k for new furnace and a/C to a new roof or tree removal in a Strom while awaiting insurance company money. Ask me how I know.natural disasters can take A large long and hard chop into E- fund.
I would, however, if the 6 months is cash, ladder CDs starting to cash in or roll over then.
If you are secure the $18 k is enough to carry you in a major emergency, then ladder OR Roth IRA is another way to go.
You have many decisions
To make, but I also would not leave JUST the 401k as your only retirement vehicle.
Look into vanguard funds as well. That's were I'd start with an extra 20 to throw around.
Best of luck.
Decisions, decisions...

[michgc]

Originally Posted by Qwerty

Then just put the funds into a savings account if you only want access to the original 20K....but as salaries grow, expenses grow, your emergency fund needs to grow, thus, putting it into mutual funds not locked into a retirement account.

But if he wants to grow his money, he can put it into a mutual fund as a Roth and still have access to the original $20K if he wants to use it as a backup emergency fund. Plus it will grow tax free. Putting it into a savings account wouldn't allow him to grow his money. If his salary grows and he needs a bigger emergency fund, then he needs to save more money. Counting on earnings from a mutual fund as more emergency fund is not wise.

[ncole1]

Originally Posted by Qwerty

Then just put the funds into a savings account if you only want access to the original 20K....but as salaries grow, expenses grow, your emergency fund needs to grow, thus, putting it into mutual funds not locked into a retirement account.

Very easy to address this - if you keep your lifestyle the same as your salary 6 months before (i.e. wait 6 months after a raise to increase expenses), then a 6 month emergency fund will stay a 6 month emergency fund!