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Old 01-24-2017, 04:52 PM
 
Location: Houston/Brenham
4,121 posts, read 4,705,040 times
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Quote:
Originally Posted by don1945 View Post
I've converted everything to cash and have it in various safety deposit boxes. Might not give me any growth, but it sure is safe. I would rather have access to cash than to make (or lose) a little profit on it. Especially in these upside down times. Should I die, my sons will also have no problem getting my inheritance.

But that is just me.
Might not give you any growth? Not only does it not grow, it shrinks. Inflation eats away at it. By the time your kids get it, it might be worth 10-30% less, depending on inflation and how long we're talking about.

This is a terrible idea. If you really don't trust rock-solid investments like bank CDs or gov bonds because you think it will all fail one day, then what good is cash? We'll be trading potatoes if that happens.

Don't. Keep. Cash.
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Old 02-01-2017, 10:24 AM
 
4,776 posts, read 6,621,340 times
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So, I've been reading on the forum about IRAs and Roth IRAs. We have neither. What we will have is a "pension" from my hubby's job and the lump sum mentioned at the beginning. Plus, hubby will get another job of some sort when he retires from his current job, so we could continue to put money away for his true retirement.

I saw that the rate of return is higher for Roth IRAs, but saw differing opinions on which is better, traditional or Roth. My question is -- should we, and can we, take some of the lump sum money and fund an IRA or either kind? Or both kinds? Wouldn't this be safer than mutual funds? Would be allowed to fully fund them all at once for the year to start out? Lots of questions, I know, please be patient.
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Old 02-12-2017, 11:09 AM
 
Location: Full time in the RV
2,869 posts, read 6,411,960 times
Reputation: 2432
Quote:
Originally Posted by Luvvarkansas View Post
So, I've been reading on the forum about IRAs and Roth IRAs. We have neither. What we will have is a "pension" from my hubby's job and the lump sum mentioned at the beginning. Plus, hubby will get another job of some sort when he retires from his current job, so we could continue to put money away for his true retirement.

I saw that the rate of return is higher for Roth IRAs, but saw differing opinions on which is better, traditional or Roth. My question is -- should we, and can we, take some of the lump sum money and fund an IRA or either kind? Or both kinds? Wouldn't this be safer than mutual funds? Would be allowed to fully fund them all at once for the year to start out? Lots of questions, I know, please be patient.
Is this money from a DROP or other pretax account?

If so see if you can do a rollover into Nationwide's Fixed Account.

It pays a fixed minimum of 3.5% with easy access to your money. It has paid higher in the past but has been at 3.5% for several years which is the floor amount for this account.

You cannot add post tax money to this.

I have a some money in this and, for my situation, I love it. It is not guaranteed so there is always some risk but I do not sit around worrying about the zombie apocalypse coming.

Last edited by RMD3819; 02-12-2017 at 12:01 PM..
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Old 02-12-2017, 11:24 AM
 
4,652 posts, read 1,224,130 times
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Quote:
Originally Posted by ThomasCrown View Post
Also didn't read through the whole thread, but depending on where you live, real estate may be the safest bet you can make. Where I live, the growth has been phenomenal, and prices and rental rates keep rising. A smart bet where I live would be to buy a rental property and rent it out, while also taking advantage of the rising property values.
This is very true. My parents, both 70, had a bit of $ ($550K) that was not earning them much of anything. The days of 5% CDs are gone. They bought two newer homes for rentals with a property manager that handles the day to day stuff. Now they have an income besides SS.
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Old 02-12-2017, 12:13 PM
 
Location: Mount Airy, Maryland
10,470 posts, read 5,939,796 times
Reputation: 16170
Quote:
Originally Posted by Luvvarkansas View Post
So, I've been reading on the forum about IRAs and Roth IRAs. We have neither. What we will have is a "pension" from my hubby's job and the lump sum mentioned at the beginning. Plus, hubby will get another job of some sort when he retires from his current job, so we could continue to put money away for his true retirement.

I saw that the rate of return is higher for Roth IRAs, but saw differing opinions on which is better, traditional or Roth. My question is -- should we, and can we, take some of the lump sum money and fund an IRA or either kind? Or both kinds? Wouldn't this be safer than mutual funds? Would be allowed to fully fund them all at once for the year to start out? Lots of questions, I know, please be patient.
Let me explain. An IRA is simply a retirement account. There are two types: traditional or Roth. A third type of account would often be called a brokerage account. I'll explain the difference below. Within the account is where you make your investment selectives, usually in the form of mutual funds. So the Roth would not be safer than a mutual fund as the mutual fund or funds make up the Roth or tradtional IRA.

Now what are the differences?

Brokerage account: Think of it as a saving account that can make a lot more money for you than a bank savings account. You take your money and deposit it into your choice of investments, again typically mutual funds. All dividends ( stocks and bonds within mutual funds pay dividends to their investors, it's part of your return) are taxable at the end of the year just as interest from the bank savings account is taxed. There are no restrictions on withdrawals however any gains the fund has made (as the stock/bond values go up) is taxable in the form of capital gains when you withdraw.

Traditional IRA: Often this is money that retirees have from their work 401(k), when they leave or retire they roll their 401 into an IRA. As the money was never taxed at withdrawal time you pay taxes. The advantage is it grows year after year without you paying any yearly taxes as you would on the brokerage account. With a traditional as well as a Roth you can not withdraw without severe penalty until you are 59 1/2.

Roth IRA: This is money that has already been taxed. In my case my weekly deposit into my 401 has has half the money going in a traditional the other half a Roth. The traditional contribution has a larger figure as it is pre-tax, the Roth half comes after I pay taxes on it so it's a lower amount. So why a Roth? Because, and this is huge, the money grows tax free. Unlike the traditional or brokerage account any future withdrawals are tax free.


I know this is probably terribly confusing as all the 401 (k) talk does not apply to you. But it was the only way I could explain things. So let's try to answer your question.

As you have a lump some of money you CAN deposit it into a Roth but there is a limit of $5,500 per person per year, if you are over 50 it is $6,500. So that is what I would do, open 2 Roths one for each of you at $6,500 each. Again it will grow tax free. Take the balance and open a joint IRA. The first of every year you can take $6,500 each and transfer it from the traditional to the Roth. You will pay a small amount of tax if the account has grown but it will be better long term as every dollar from that point on in the Roth can be taken out without a penny of tax.

Again keep in mind an IRA is simply an account, you still need to find a home for this money in that account. That is where mutual fund selection comes in. As we discussed Vanguard is a great place, they kind of invented the low fee mutual fund business. And as discussed their Wellesly 40% stocks 60% bonds or Wellington 60% stock 40% bonds would be good choices.

I hope this helps, I know terribly it's confusing for someone new to this. I would hate to see you pay thousands for an advisor if we can at least get you started in the right direction. Vanguard will be very helpful when you call but it would help if you understood what things like an IRA or a mutual fund are. Tell them how conservative you need to be an pd allow them to make recommendations. Again if you need a big sum for a car you may want to pull that money aside and simply put it in the bamk if you think it will be within a year or two.

Last edited by DaveinMtAiry; 02-12-2017 at 12:25 PM..
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Old 02-12-2017, 12:35 PM
 
Location: Prescott AZ
6,130 posts, read 9,093,524 times
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I had an old Swedish mother in law and she kept her money in the oven.

She didn't bake very much so thought this was safe. LOL
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Old 02-12-2017, 03:15 PM
 
Location: Tampa, FL
27,798 posts, read 26,235,889 times
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Quote:
Originally Posted by MrRational View Post
For five years or more = equities.
For up to three years = CD's


Safety is an illusion and interest is about zero
I'd agree with this. To add: stack/ladder the CDs and dollar cost average the equities (ETFs or mutual fund). Make sure the equities are diversified by sector and country.
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Old 02-15-2017, 09:07 PM
 
4,575 posts, read 7,066,289 times
Reputation: 4222
Anyone have any experience investing with Merrill Lynch...I never hear much about them.
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Old 02-16-2017, 07:16 AM
 
Location: Houston/Brenham
4,121 posts, read 4,705,040 times
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Quote:
Originally Posted by loveautumn View Post
Anyone have any experience investing with Merrill Lynch...I never hear much about them.
Most of the old-style investment firms cost you a pretty penny. Merrill, Goldman, etc, all cost 2-4% to manage your money.

You can achieve the same thing at a Vanguard for 1/4%.

And that's why you don't hear much about Merrill.
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Old 02-19-2017, 11:25 AM
 
9,151 posts, read 7,223,215 times
Reputation: 13848
Quote:
Originally Posted by DaveinMtAiry View Post
What he means by "ladder" is a CD is a way to earn more interest, you buy a 5 year CD but the catch to the higher interest is you can't touch the money without penalty for 5 years. So by "laddering" you buy them with different increments. Say get a 1 year CD where you have access to that money in a year, then maybe put some in a 2 year, then a 5 year to get higher returns. But again longer means locking in to current low rates, at under 2% you are losing money to inflation and of course the interest is taxable. But it is a way to solve one of your goals, it will be totally safe. But it won't come close to matching your goal of 3-4%.


Under no circumstances would I hire a financial planner. Either you pay them a one time fee of thousands (one time fee only advisor) or they lock you in and charge you 1% forever for putting you into their recommended investments. I made that mistake when I was new, never again.


Why pay an advisor when so many experts recommend Vanguard Wellesley mutual fund? A a mutual fund is a collection of a bunch of different stocks, bonds and some cash to smooth out the bumps. Call Vanguard and they will walk you through the process, buy it and simply leave it there. This is by far your best option assuming you have more than 2-3 years IMO. Again every stock/bond investment can lose money but I believe this mutual fund is one of the few to never had 2 losing years in a row. And what ever you do DO NOT panic if it goes down and sell. That is how the smart people make money, they profit from beginners selling low. Don't be that guy. Be patient, not always an easy thing for a beginner who has never had money, but this is clearly the best method to ride out the lows. Not even a question.
I've always wondered. Do they charge you 1% of the profits yearly, or 1% of the investment account's total value?
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