what else can a person do that has the following items in action: maxed out a 401-k for under 50 ($16,500) roth IRA ($6,000) profit sharing plan 25% of compensation paid by employer
I wish this woud be me, but no such luck. What would you suggest to someone that has done the above, but would like to sock away more for retirement. Any suggestions are very much appreciated.
Thanks Liz in Albuquerque, NM
"Liz" wrote
After-tax investments do very well. Also consider a non-qualified annuity investment, muni-bonds. Any "savings" socks away more - for retirement or any other situation.
Apart from making sure he has a rainy day fund of six months' living expenses, that is.
What else? Be real thankful that (a) he has a job, and (b) lives in America.
No, not meant to sound "that" way, but real advice.
ChEAr$, Harlan Lunsford, EA n LA
If you rent, and don't expect to move for many years, buy a house.
If you own, pay down your mortgage.
Invest diversified.
You might consider diversifying your savings, The vast majority of your savings are in deferred income investments. The tax laws on these are not that great currently, i.e. taxed nearly double long term capital gains rates in most brackets. And taxes could get worse as a greedy government eyes huge pools of untaxed money out there. Look at deferred capital gains like an index ETF. Most of the gains wont be taxed until you sell it decades from now. An index is diversified and as safe as anything else over a long period of time. A sector fund could grow cold. Real estate is also deferred gains, but I dont understand it well.
I second this advice.
A common trap is for people to think, "If I contribute the maximum to the available qualified retirement accounts and plans, I've saved enough." This is not true in many/most cases.
Steve
In addition to the other answers, and although technically not a retirement plan, consider a "health savings account" if you qualify to have one.
The maximum for a Roth (or traditional) IRA for someone UNDER 50 is $5,000.
Invest in a taxable stock portfolio. Capital gains aren't taxed until the gains are realized and if the capital gains are long-term, the tax rate is reduced.
The money in a 401-k can eventually be converted to a Roth but the conversion will be taxed. So it will help to have some liquid assets on hand.
-- Ron
If you are under 50, the max IRA contribution is $5,000 for 2009 (and
2010 as well, I believe)
There is a housing credit of $8000 or $6500, provided you meet the conditions (income limits, etc). The credit expires some time in April.
Disagree. Better to invest in the stock market . In this recovering stock market, you could make 10% a year, whereas your mortgage interest might be only 5%.
This is the prime situation for a tax-deferred annuity. Be wery wery careful though of fees. TDA's used to be very popular when the tax- deferral limits on retirement plans were much lower. There are now some TDA products with much lower fees than there used to be.
Another option is a tax-managed mutual fund. Typically these are index-type funds. Hopefully I will not be breaking group rules if I mention one as an example, Vanguard Tax-Managed Growth and Income. Basically it invests in an S&P500 type indexing approach. It will engage in minimal trading that would result in taxable capital gains. If it does realize gains, it will try to harvest losses to offset them. For example, if a stock is removed from the index, it might sell another stock it owns at a loss, invest the money in a related stock, then after the wash sale rule period expires, go back into the original stock. These funds do throw off taxable dividends, but I don't think the fund I mentioned has ever had a capital gains distribution. As a result, most of the gains accumulate tax- deferred. In fact, this may well be a better alternative than a TDA, because when you finally cash it out, the appreciation is taxed at capital gains rates.
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