How do you save/invest your money?

[legend]

I'm maxing out my 401k and killed all debt at the start of this year. I took a bit of a hit to do that, but now I'm reaching a point where I have enough in my checking account that I should start saving it better rather than letting it all sit there. I'm also weighing what to do against the fact that I'm probably going to have to get a new car this year or next, which means I need enough fluidity + buffer to be comfortable doing that.

 

Savings accounts seem like mostly garbage to me when I look at them. Getting a portfolio seems like a reasonable decision, but in these strange times, I'm a little hesitant about putting my money in stocks, even a well distributed portfolio. One option is to do a dividend based portfolio which is a little more stable, but maybe less chance for increased funds. Any thoughts on that?

 

 

Those of you may remember I've asked a similar question before. But since I'm now past the point of taking care of the obvious (maxing 401K and clearing all debt), and because the market may be behaving a bit differently now, I thought I'd ping people again. Especially since I can no longer revisit that earlier thread  

 

I remember people had mentioned IRAs, although I think I can't take full advantage of that because I'm pretty close to the income line for a two person household.

 

I also did buy the Random Walk Down Wall Street book on advice from this board before. I haven't read all of it, but it's been a good read. Still though, I'd benefit from other thoughts.

[johnny]

Buy guns before the liberals make them illegal. Then sell them for a huge profit on the black market. 

[silentbob]

I invested in a grow tent and some special seeds that will flower into some beautiful smoke for some friends and I. Spend some money and make some money. Gotta love being Canadian 

[Jason]

You can get 1.75%-2% with some online savings accounts. Still not great but you presumably want to have some liquid savings somewhere. I've been using Amex and they've been pretty promptly increasing their rate as the Fed increases the benchmark rate.

[Triage]

I have no investments and savings has been hard because of many different events in our live. Once we are done with the wedding this year, I will budget better and save left over funds. Start paying off debt one by one. I'm hoping in 5 years we will be in a better financial situation plus we will have nice equity in our house (granted the house market doesn't crash). 

[TomCat]

3 hours ago, silentbob said:

I invested in a grow tent and some special seeds that will flower into some beautiful smoke for some friends and I. Spend some money and make some money. Gotta love being Canadian 

nice I got a room in my basement

[Joe]

10 hours ago, legend said:

I'm maxing out my 401k and killed all debt at the start of this year. I took a bit of a hit to do that, but now I'm reaching a point where I have enough in my checking account that I should start saving it better rather than letting it all sit there. I'm also weighing what to do against the fact that I'm probably going to have to get a new car this year or next, which means I need enough fluidity + buffer to be comfortable doing that.

 

Savings accounts seem like mostly garbage to me when I look at them. Getting a portfolio seems like a reasonable decision, but in these strange times, I'm a little hesitant about putting my money in stocks, even a well distributed portfolio. One option is to do a dividend based portfolio which is a little more stable, but maybe less chance for increased funds. Any thoughts on that?

 

 

Those of you may remember I've asked a similar question before. But since I'm now past the point of taking care of the obvious (maxing 401K and clearing all debt), and because the market may be behaving a bit differently now, I thought I'd ping people again. Especially since I can no longer revisit that earlier thread  

 

I remember people had mentioned IRAs, although I think I can't take full advantage of that because I'm pretty close to the income line for a two person household.

 

I also did buy the Random Walk Down Wall Street book on advice from this board before. I haven't read all of it, but it's been a good read. Still though, I'd benefit from other thoughts.

 

Any reason why you are maxing out your 401k? Does your employer do employee match?

[legend]

1 hour ago, Jose said:

 

Any reason why you are maxing out your 401k? Does your employer do employee match?

 

Unfortunately, they do not. But it at least has some tax benefit. IRA would be preferable, but I can't make as much use of that from my income limit is my understanding.

[Nokt]

Not much better than a savings account, but you could do CD's.

[Joe]

52 minutes ago, legend said:

 

Unfortunately, they do not. But it at least has some tax benefit. IRA would be preferable, but I can't make as much use of that from my income limit is my understanding.

 

Regular IRA's arent that great. I think you are referring to a ROTH IRA, which has an inckme limit for a married couple filing jointly of $189,000 a year.

[Joe]

@legend

 

Honestly 401k isnt that great without employee match. Deferring your taxes on your 401k isn't much of a help considering we are living in a time with very low income tax, historically speaking. In all probability, you will be in a higher tax bracket when you retire and the tax rate of that bracket will probably be higher as well.

[legend]

12 hours ago, Jose said:

 

Regular IRA's arent that great. I think you are referring to a ROTH IRA, which has an inckme limit for a married couple filing jointly of $189,000 a year.

 

Thanks. Yes, you are correct. I meant ROTH. I'll have to double check. Last time I checked the limit seemed lower, because I bring in the sole income between my wife me, but I'm not making that much. So maybe I made a mistake when looking at it. I remember seeing that you would get diminishing amounts you could invest and while I could invest some, not much, and I'd have to do a bit more managing of it to make sure I did it right.

 

10 hours ago, Jose said:

@legend

 

Honestly 401k isnt that great without employee match. Deferring your taxes on your 401k isn't much of a help considering we are living in a time with very low income tax, historically speaking. In all probability, you will be in a higher tax bracket when you retire and the tax rate of that bracket will probably be higher as well.

 

Yeah, I know the 401K isn't great for that reason, but the tax free on entry on entry is better than nothing at all. I would prefer ROTH IRA if I can.

[Remarkableriots]

I invest all my money in Sushi...

[legend]

Looking again, I think I must have made a mistake before. I think I was looking at the single income limit. Going by what I'm reading, I can contribute $5500 a year to one. So that at least seems like the obvious next thing to do.

 

I think I'll probably still want to do something more on top of that. Money sitting in a checking account beyond what you could reasonably need immediately just seems stupid  

[Paperclyp]

Right now we just have our 401k’s maxed and are putting everything extra for the most part into my student loans. It really is criminal the rates and amount of money the government inflicts on young adults, and it makes me angry to think about. 

 

But we should have those paid off within a year, about 5-6 years ahead of schedule, then we will look into investing. 

[legend]

11 minutes ago, Paperclyp said:

Right now we just have our 401k’s maxed and are putting everything extra for the most part into my student loans. It really is criminal the rates and amount of money the government inflicts on young adults, and it makes me angry to think about. 

 

But we should have those paid off within a year, about 5-6 years ahead of schedule, then we will look into investing. 

 

I can't stress enough how great it felt to pay off the student loans. I totally endorse knocking it out!

[SuperSpreader]

1 hour ago, Remarkableriots said:

I invest all my money in Sushi...

 

[Joe]

Putting a little into 529's for the future education of your children isnt a terrible idea. Just dont get carried away because if they dont end up going to college, you will suffer a 10% penalty to get that money back plus you will pay the taxes you hadn't paid before.

[Remarkableriots]

6 hours ago, legend said:

Looking again, I think I must have made a mistake before. I think I was looking at the single income limit. Going by what I'm reading, I can contribute $5500 a year to one. So that at least seems like the obvious next thing to do.

 

I think I'll probably still want to do something more on top of that. Money sitting in a checking account beyond what you could reasonably need immediately just seems stupid  

My checking account is always empty! 

[Paperclyp]

6 hours ago, legend said:

 

I can't stress enough how great it felt to pay off the student loans. I totally endorse knocking it out!

I'm getting there. It's hard to imagine that eventually I can just pocket all that money instead of making these payments. 

[Jason]

12 hours ago, legend said:

 

Thanks. Yes, you are correct. I meant ROTH. I'll have to double check. Last time I checked the limit seemed lower, because I bring in the sole income between my wife me, but I'm not making that much. So maybe I made a mistake when looking at it. I remember seeing that you would get diminishing amounts you could invest and while I could invest some, not much, and I'd have to do a bit more managing of it to make sure I did it right.

 

 

Yeah, I know the 401K isn't great for that reason, but the tax free on entry on entry is better than nothing at all. I would prefer ROTH IRA if I can.

 

I won't claim to be an expert here but what my father explained to me about regular 401ks vs Roth IRAs is that you're basically making a bet about what tax bracket you'll be in upon retirement. And that if you expect to be in a higher tax bracket, do a Roth, and if you expect to at most stay in the same tax bracket, do a 401k...tax free upon entry isn't great if you'll be in a higher bracket. 

 

12 hours ago, legend said:

Money sitting in a checking account beyond what you could reasonably need immediately just seems stupid  

 

Hence why I suggested those online savings accounts as a less-awful way of keeping a liquid emergency fund handy.

[legend]

23 minutes ago, Jason said:

 

I won't claim to be an expert here but what my father explained to me about regular 401ks vs Roth IRAs is that you're basically making a bet about what tax bracket you'll be in upon retirement. And that if you expect to be in a higher tax bracket, do a Roth, and if you expect to at most stay in the same tax bracket, do a 401k...tax free upon entry isn't great if you'll be in a higher bracket. 

 

 

Hence why I suggested those online savings accounts as a less-awful way of keeping a liquid emergency fund handy.

 

Looks like I should be able to do both. 401K has a much higher limit (18,000) versus ROTH IRA ($5500) from what I can tell.

[Joe]

Diversification is always key. Have you looked at whole life insurance policies? Guaranteed returns of 4% (actual returns have always been higher tho) with reputable companies. Money stays liquid, too. It's a great option over investing in bonds or letting the money collect dust in a savings account.

[Jason]

1 hour ago, Jose said:

Diversification is always key. Have you looked at whole life insurance policies? Guaranteed returns of 4% (actual returns have always been higher tho) with reputable companies. Money stays liquid, too. It's a great option over investing in bonds or letting the money collect dust in a savings account.

 

What's the timeline on getting the money out of the account? To me, one of the advantages of the online savings accounts I'm mentioning is that you have normal ACH access to the account, so if you REALLY needed to you could get money out of the account quicker than waiting for a cash-out or transfer or whatever to process.

[Joe]

7 minutes ago, Jason said:

 

What's the timeline on getting the money out of the account? To me, one of the advantages of the online savings accounts I'm mentioning is that you have normal ACH access to the account, so if you REALLY needed to you could get money out of the account quicker than waiting for a cash-out or transfer or whatever to process.

 

Very quick. You can also take a loan out against it. Valley National will give you a checkbook the day you request it. Ive done it before it, awesome.

 

But by no means was I trying to quash your savings account idea. There should still be some money there for sure.

[atom631]

My house is my savings plan. I plan to have it paid off by the time i retire at 110 and then move into a section 8 house and milk the system for remainder of my days. 

[legend]

8 hours ago, Jose said:

Diversification is always key. Have you looked at whole life insurance policies? Guaranteed returns of 4% (actual returns have always been higher tho) with reputable companies. Money stays liquid, too. It's a great option over investing in bonds or letting the money collect dust in a savings account.

 

I haven't looked into that before. Sounds interesting! I will check it out.

[monkk]

On 7/15/2018 at 11:15 PM, Jose said:

Diversification is always key. Have you looked at whole life insurance policies? Guaranteed returns of 4% (actual returns have always been higher tho) with reputable companies. Money stays liquid, too. It's a great option over investing in bonds or letting the money collect dust in a savings account.

You just lost all credibility with me. Whole Life is just about never a good idea. If you were sold a WL policy, it it because they earn your salesman 80% of your first years cost and they only care about your money.

[Joe]

6 minutes ago, monkk said:

You just lost all credibility with me. Whole Life is just about never a good idea. If you were sold a WL policy, it it because they earn your salesman is earning 80% of your first years cost and only cares about your money.

 

Did you just register to make this post? That 80% number is a blatant lie and anyway, you need to provide an actual reason as for why it is a bad idea other than a made up commission number.

[monkk]

Yes, I registered 7 years ago because I knew eventually my time would come that I could make this post.

 

https://www.nerdwallet.com/blog/insurance/life-insurance-agent-commissions/

 

If you need life insurance, get term. If you have extra money left over, put it in an index fund that charges less than .2% in fees.

 

Here is why fees matter: https://www.pbs.org/wgbh/pages/frontline/retirement/etc/tyranny.html

 

If you are paying just 2% in fees per year, the company keeps 66% of your money and you only keep 33% of the pot long-term.

[Joe]

54 minutes ago, monkk said:

Yes, I registered 7 years ago because I knew eventually my time would come that I could make this post.

 

https://www.nerdwallet.com/blog/insurance/life-insurance-agent-commissions/

 

If you need life insurance, get term. If you have extra money left over, put it in an index fund that charges less than .2% in fees.

 

Here is why fees matter: https://www.pbs.org/wgbh/pages/frontline/retirement/etc/tyranny.html

 

If you are paying just 2% in fees per year, the company keeps 66% of your money and you only keep 33% of the pot long-term.

 

Why did you link a study that decries mutual funds? When did I ever recommend mutual funds? Also, it's funny that you recommend investing in Vanguard and then post a link to a study created by the founder of Vanguard.

 

Also, your 8% RoR is a fairy tale. The market is way up and everyone knows it. Recommending someone investing in a Vanguard ETF right now is downright terrible advice. The OP even mentioned his hesitancy to invest in this wild environment.

 

Moving on, whole life insurance charges $0 fees to the client. The life insurance company compensates the agent, not the client. Unlike investing in a Vanguard ETF, you are GUARANTEED 4% and it will likely to better than that. Try getting a guarantee from your Vanguard account.

[Guest]

If anybody has $50k, I can get you an 8% interest rate for the next 60 months

[monkk]

I'm showing you the big picture. 80% of fees in the first year and 6% for each additional year is destroying earnings potential.

 

17 minutes ago, Jose said:

compensates the agent

Where do you think the insurance company gets the money to give to their agents? Oh, from their clients.

 

Quote

right now

Never time the market. I could quote a hundred people who said 2014 was a bubble, and 2016, and 2017... If you didn't invest you would have missed the gains. Productivity increasing isn't likely to stop any time soon. The return of the stock market over the last 100 years is 10%. 7% Real.

 

 

Why is this so sticky to you? Do you make money selling insurance? Have you invested a large amount into WLI and don't want to hear that you wasted it? Do you have a very conservative approach to life and can't bear risk?

 

[Joe]

2 hours ago, monkk said:

I'm showing you the big picture. 80% of fees in the first year and 6% for each additional year is destroying earnings potential.

 

Where do you think the insurance company gets the money to give to their agents? Oh, from their clients.

 

Never time the market. I could quote a hundred people who said 2014 was a bubble, and 2016, and 2017... If you didn't invest you would have missed the gains. Productivity increasing isn't likely to stop any time soon. The return of the stock market over the last 100 years is 10%. 7% Real.

 

 

Why is this so sticky to you? Do you make money selling insurance? Have you invested a large amount into WLI and don't want to hear that you wasted it? Do you have a very conservative approach to life and can't bear risk?

 

 

 

Again, we are talking about diversification here. Whole life isnt supposed to compete with high return investments (although it carries none of the risk of a high return investment). It behaves more similarly to bonds, which are a part of nearly everyone's well-diversified portfolio.  The difference being that bonds dip sometimes as well, where as whole life never will. Not to mention the added death benefit.

[SilentWorld]

 

 

3 hours ago, Jose said:

 

Or the notion that the policy itself pays the agent? These are all lies amd your lack of evidence shows that.



I'm surprised that you're pushing back so much on this (going as far as to call that other dude a liar). I thought it was common knowledge that insurance salesmen get paid on commission and are considered to be one step above used car salesmen (or below depending on who you're asking) . 

 

Here you go:

Quote

Commissions vary by policy and company, but life insurance agents often receive 80% to 100% of the first year’s policy premium as commission. 

 

“In fact, most of the time companies are in the hole in the first year,” notes Glenn Daily, a fee-only insurance advisor in New York City. Those commissions and other costs are why most permanent life insurance policies, such as whole life insurance, build no cash value in the first year.

 

 

In general, whole life insurance is a TERRIBLE idea if there's any possibility you will cancel the policy in the short term (if you cancel in the short term there are significant fees that pretty much eat up the whole value of the policy)... pretty bad if you might cancel the policy in the medium term (if you cancel after 10 years, you'll basically get your principal back)... and borderline ok* if you 100% know you'll keep the policy for 20+ years.

 

The main benefits of a whole life policy are tax sheltered growth, and the fact that life insurance payouts are not subject to estate tax. So, for very wealthy people, whole life goes from being "borderline ok" to a pretty good idea. 

 

*Whole life is a bundled product -- life insurance PLUS an investment product. When I say it's borderline ok, what I mean is this: After 20 years, you'll end up with a cash value roughly about the same as if you had taken your premiums SUBTRACTED the premiums of a term 20 life insurance policy and invested the remainder in bonds. So... when I say it's borderline ok, that's ONLY true if you actually want/need life insurance. If you don't need/want it, then you'd be better off investing the cost of the premium elsewhere. My sister bought whole life on her freaking baby! What a stupid idea! Why does a baby need life insurance.