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  • Excess of money

    In a scenario where my spouse and I were able to maximize our 401 k, Roth IRA, 529 for our two children, and paid off our mortgage, where do you suggest we put the excess of our money? We don’t have any loans or debts. We also don’t want to leave the money in the bank where it earns barely anything in interest. Thank you.

  • #2
    After tax deferred space is filled up, the next best easy investment is a taxable account. Develop an investment plan that includes your target asset allocation. Then open a taxable account at a low cost mutual fund company such as Vanguard and invest the extra dollars in a 3 fund portfolio based on your target asset allocation.

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    • ee3451
      ee3451 commented
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      Thank you!

  • #3
    Taxable.

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    • ee3451
      ee3451 commented
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      Thank you!

  • #4
    Funny you should ask. The physician philosopher just did a post on that.
    https://thephysicianphilosopher.com/...erage-account/

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    • ee3451
      ee3451 commented
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      Thank you!

  • #5
    As others have said, the answer is a taxable account. Congratulations on this milestone.

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    • ee3451
      ee3451 commented
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      Thank you!

  • #6
    Is an HSA available to you? If not then taxable is a good spot.

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    • ee3451
      ee3451 commented
      Editing a comment
      Thank you!

  • #7
    I'd like to mention tax efficient investments in your taxable accounts. Took me years of not paying attention to address this.
    "Oh look another bajillion point declin-Ooooh!!! A coupon for pizza!!!!" <--- This is what everyone's IPS should be. ✓✓✓

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    • smiles123
      smiles123 commented
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      Like municipal bonds and REITS? Any specific fund/ticker?

  • #8
    I also suggest a taxable account. If you are a really good saver it will dwarf your tax deferred space in a few years.

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    • #9
      You don't have to open one with Vanguard just to get access to their great ETFs.

      Schwab, Fidelity, E-trade all offer commission free ETF trading now. I have my taxable account at Schwab since I like their app and customer service better, plus I have my 401k and checking accounts there already. I buy VTI/VXUS there monthly.

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      • #10
        Originally posted by smiles123
        Like municipal bonds and REITS? Any specific fund/ticker?
        Not necessarily. Anything that doesn't kick off a lot of taxable dividends/distributions. I traded an actively managed fund for a passively managed fund because of the significantly lower taxable dividends/distrubutions. Passive funds, index funds will generally be your best choices. And their fees / expense ratios are usually significantly cheaper.
        This may help:

        https://investor.vanguard.com/invest...d-gains-losses

        Then look at the realized capital gain/loss percentages of these similar yet very different sector funds. Not advocating for sector funds, but it illustrates my point very well.

        https://investor.vanguard.com/mutual...ibutions/vhcix

        https://investor.vanguard.com/mutual...ibutions/vghax

        One will be much more tax efficient "along the way" in a taxable account. And comparing the performance of both funds (not just the share prices), for the same time period, the end values are extremely similar, & usually the passive index more tax efficient fund ended up outperforming the active less tax efficient fund in this scenario.

        https://investor.vanguard.com/mutual...formance/vhcix

        Scroll down then add "vghax" (without the quotes) in the search box next to the chart. See the end balances for each of the time frames.

        Depending on your desired asset allocation, you pick the cheapest funds (expense ratio & taxable distribution/dividends) that works for you.

        VT is one of my favorite ETFs. VTWAX as the corresponding mutual fund. Broad enough, cheap enough, simple enough.
        "Oh look another bajillion point declin-Ooooh!!! A coupon for pizza!!!!" <--- This is what everyone's IPS should be. ✓✓✓

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