Saving for house and retirement, best places to put money? (fund, payment)

[CTbrooktrout]

Right now I have all my money in TD Banknorth but I know I should be doing better with it, if anything at least "high interest" savings and checking accounts.

If I'm saving to buy a house in 5-8 years... where should I be putting my money?

I'm also trying to start saving for retirement (I'm 24) so I'm thinking a Roth IRA could work since I understand up to 10k can be used towards a house tax and penalty free.

After that, should I put some money in a taxable brokerage account, muni bonds, CDs, or just stick with the "high yield" savings/checking accounts?

Really appreciate any responses

[Darrow]

Currently (as of Wed.) my mutual funds were earning 5%, not much - but better than savings and the money market. There are a lot of differing opinions on what investment tool to use. I prefer mutual funds. I've had CD's and they just don't pay anymore and need I say anything about a regular savings account? My short-term savings is in a money market brokerage account with check writing. It's in a conservative, gov. backed fund and is hardly growing - but that's the climate right now...when you mentioned in your opening sentence "high Interest" I nearly spewed my coffee...no such thing right now.

You have an excellent plan for retirement and should get that going ASAP. I like the idea that the Roth can be used towards a house - great incentive!

You're young and should expose yourself a little more agressively to growth stock mutual funds. Wish I would have had your knowledge when I was 24!

[CTbrooktrout]

I'd take 5% right now. How aggressive should I be with the money I'd want going towards the house in 5-8yrs? Would vanguard s&p 500 be in line as far as risk? Personally I see the economy recovering within that time and funds taking advantage of the upswing.

Is there an ideal percentage of return I should be trying to find when saving for what I am in my time period? I like to use the s&p 500 index as the benchmark, it's been around 9.xx% over the last 100 years or so, but that seems like a dream at this point in time.

[Darrow]

We use Fidelity and American Funds. I don't know anything about Vanguard, but honestly...it's probably just the same. We have 4 different funds with Fidelity - that's our main retirement portfolio: large, mid & small cap, plus a conservative bond fund we parked money in years ago. The American Funds is where the Roth IRA is. I think it was $250 to open and costs $10 a year to service plus the commission. I buy A shares which pulls the commission in the beginning instead of the end.

Our emergency fund money and short term savings (trips) is in a money market with a brokerage firm rather than bank. We chose a brokerage over a bank because the interest they pay is better, you can get better CD rates if you choose and should you want to trade stock you can....also banks just p*** me off! Our broker is independent and does not charge consultation fees or a set up fee...he's awesome and earns the commission. You can also get into mutual funds this way without having the penalties with a retirement account.

Good luck in your endeavors!

[debtmonger]

We have used Fidelity, AF and Vanguard. Vanguard's expenses are about as cheap as you can get. All of these family of funds have good funds and some not so good. Look for funds that have been around the block and have good long track records. Roth's are fantastic. Stocks are on sell, so don't delay. Dollar cost averaging is one of the best ways to invest. You just can't time the market.

[drshang]

You should definitely max your Roth IRA. Even if you only put it in something safe like T-bills or low risk corporate bonds you have the tax benefits when you retire, although for a 5-8 year time horizon stocks are probably okay, but if you want to go corporate bonds I'd look at HYG (high yield growth bond index). Think about it this way: you can use the 10k for a house downpayment if in 5-8 years you buy a house and need the money. If not, you have tax free retirement money if you come onto some cash windfall or end up not buying a house at all, or if your life changes in some other way.

[Moonwalkr]

I'd second maxing your Roth, it will be useful for your home purchase. I anticipate a modest gain this year and maybe a little better performing next, but choose a low fee (Vanguard?) mutual fund that's indexed or more bond-based (lower risk, lower yield). Good luck!

[crash330]

Just remember that the 'sounds good' 5% ROR means that it will take 14.4 for your money to double. I would definitely open a Roth IRA and max it out. I think that it's $416 a month for someone your age. You can withdraw the principal you have put in before age 59 1/2. Good luck and get to saving.