Current Events > Investment question.

(+) Yeah! (+)

My wife and I are each putting 12% in our individual Roth 401ks (meets max company match). We also already deposited $5,500 each to our own Roth IRAs this year (figure we do it at end of April, so that we can get the most gains possible).

We recently refinanced our student loans to a 15-year loan at 5% APR, with a monthly payment of ~$800/mo for both of us. We are paying $1200/mo (i.e. overpaying by ~$400/mo), so that we can pay this off in about 7 years instead.

We still have some excess money, and don't feel like paying more into our student loans, and don't need to pay more into our mortgage (as we are selling this house in the next couple years, and thus there's no reason for us to overpay our mortgage). I also don't want to put more money into our 401ks, as taking money out of that is a pain in the ass; I would rather have a more liquidable asset.

So I was thinking about opening a traditional investment account, and putting some money in there. I found some roboadvisors (Wealthfront and Wisebanyan), and am thinking of doing moderate risk, at 5% cash, 55% stocks, and 45% bonds. Is that a good idea or what?

For comparison, our 401ks are 100% in VFFVX (Vanguard Target Retirement 2055 Fund), and both of our Roth IRAs are at 80% stocks and 20% bonds aggressive risk portfolio.
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bump
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Or is this a question for a financial advisor...? Which will bring me to another question: how do you find one? >_>
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IdiotMachine posted...

Or is this a question for a financial advisor...? Which will bring me to another question: how do you find one? >_>

i kinda trust bonds because you know what you're getting. stocks are too volatile imo because of all the crap going on in this world right now with the trade war jabs that messes with stocks.
they have financial advisers. probably in the yellow pages.
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I don't know how much "some excess money" is, but it sounds like you don't have much cash, and you said you wanted liquidity. I would just keep whatever that money is in the bank, it makes your life a lot easier.

Related

https://www.youtube.com/watch?v=RCFSTNf42OI" data-time="
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savings accounts don't pay out as much as TC would hope for. i'm guessing in a financial sense they would be low risk since funds are protected pretty much up to 250k insurance and have a low APR on payout based on cash saved.
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IdiotMachine posted...

We recently refinanced our student loans to a 15-year loan at 5% APR, with a monthly payment of ~$800/mo for both of us. We are paying $1200/mo (i.e. overpaying by ~$400/mo), so that we can pay this off in about 7 years instead.

Damn, that's a lot of debt

anything you put in bonds are going to do worse than 5% and with more risk

If you arent willing to bear the risk of going heavier in stocks, pay off the mortgage even faster instead

Take out a home equity line of credit when you can to get back the liquidity you would have had by putting the money in bonds (leave it at 0 balance, therell be a nominal annual fee but worth it)
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whoops the 5% are loans not mortgage

Advice still stands imo

why do you think selling your house changes whether you should pre pay? Youve got to pay off the mortgage no matter what...
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deupd_u posted...

I don't know how much "some excess money" is, but it sounds like you don't have much cash, and you said you wanted liquidity. I would just keep whatever that money is in the bank, it makes your life a lot easier.

Related

https://www.youtube.com/watch?v=RCFSTNf42OI" data-time="

Nah, problem is we have too much cash. I don't want cash, but rather put it in some stocks/bonds, and not in a tax advantaged account (as we maxed it out).
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kingdrake2 posted...

savings accounts don't pay out as much as TC would hope for. i'm guessing in a financial sense they would be low risk since funds are protected pretty much up to 250k insurance and have a low APR on payout based on cash saved.

Yup. I don't want to keep our cash in the savings account with paltry 1.25%...

Kruppe posted...

IdiotMachine posted...

We recently refinanced our student loans to a 15-year loan at 5% APR, with a monthly payment of ~$800/mo for both of us. We are paying $1200/mo (i.e. overpaying by ~$400/mo), so that we can pay this off in about 7 years instead.

Damn, that's a lot of debt

About $40k for each of us, yup. Still, it was worth it since we have good careers now! At least that's what I tell myself.

g980 posted...

why do you think selling your house changes whether you should pre pay? Youve got to pay off the mortgage no matter what...

Because who cares if I pay into it? I'll get paid back the amount I paid into it since I'll be selling it.
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You should be maxing tax advantaged accounts (your 401k) before considering a taxable account. Given your statement on pulling money out of your 401k is a pain, it sounds like you need to build your emergency savings first. I'm assuming you're relatively young so your bond allocation is too high (way too conservative). You also won't get a 5% return on bonds so you should be paying your student loans off first. To summarize:

Build emergency fund
Put more into your 401k
Or pay more of your student loans
then consider a taxable account (with fewer bonds)

Cheers.
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Magic Bean posted...

You should be maxing tax advantaged accounts (your 401k) before considering a taxable account. Given your statement on pulling money out of your 401k is a pain, it sounds like you need to build your emergency savings first. I'm assuming you're relatively young so your bond allocation is too high (way too conservative). You also won't get a 5% return on bonds so you should be paying your student loans off first. To summarize:

Build emergency fund
Put more into your 401k
Or pay more of your student loans
then consider a taxable account (with fewer bonds)

Cheers.

Well here's the reason why we don't want to maximize 401k to the legal limit: we might buy a more expensive house in a couple years. Hence why we're just maxing to the company match.

As far as emergency savings/cash, we have plenty... hence why we're thinking of putting this in a taxable account and keeping only like $15k in cash in our bank.
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IdiotMachine posted...

g980 posted...

why do you think selling your house changes whether you should pre pay? Youve got to pay off the mortgage no matter what...

Because who cares if I pay into it? I'll get paid back the amount I paid into it since I'll be selling it.

So? You still avoid paying interest on what you pay down early. Then you can reinvest when you sell, or put it towards your next mortgage

And you dont need to max out tax advantages accounts before putting money elsewhere. If you can, great, but consider other big future pre retirement expenses too (house upgrades, kids, kids tuition, etc)
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g980 posted...

So? You still avoid paying interest on what you pay down early. Then you can reinvest when you sell, or put it towards your next mortgage

Eh... Our house mortgage is 2.25%.

g980 posted...

And you dont need to max out tax advantages accounts before putting money elsewhere. If you can, great, but consider other big future pre retirement expenses too (house upgrades, kids, kids tuition, etc)

Exactly. That's what we're considering; instead of maxing out 401k, put money in a regular account vs savings.
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IdiotMachine posted...

we have too much cash

IdiotMachine posted...

$15k in cash in our bank

Literally me:
https://i.ytimg.com/vi/h9Wx3ajbE7Y/maxresdefault.jpg
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Ok yea if the mortgage is 2.25% (wtf how??) dont touch it
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deupd_u posted...

IdiotMachine posted...

we have too much cash

IdiotMachine posted...

$15k in cash in our bank

Literally me:
https://i.ytimg.com/vi/h9Wx3ajbE7Y/maxresdefault.jpg

You should read that whole sentence brah.
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I would pay towards those student loans.

Trump is trying to get his fat fingers into the economy and were going to face another recession sooner than later (track record for R presidents and recessions is very poor)

Ive already sold half my positions