My pleasure Al. Good luck.
Given the expense ratios of typical 401k plans, I would recommend rolling over the 401k to an IRA. To find a fee-only advisor, many of whom charge by the hour (and you might only need an hour or two of time) - go to www.napfa.org and search in your area. Fee only, hourly planners charge anywhere from $150-$300 per hour.
Moira, you are doing a great job saving. I like the fact that you have three taxable buckets in your investment plan - taxable, tax deferred and tax free. Keep this up!! The other, and most important, thing you can do is to avoid running up a lot of debt. You did not mention any children so I am assuming college is not an issue. Do you own a home?
We have one more question from the "ahead of time" folks. Deborah, perhaps?
Kiplinger - can you repost that NAPFA link for Rebeca?
MissMeghan, it sounds like the house is more in your mind than retirement. So, at this point you should be thinking about building up that cash reserve for the house purchase. You have to balance that along with the cost of the loans. If the loan is costing you, say, 6% and cash earns little to nothing, then clearly paying extra on the loan is to your advantage, but don't pay so much that you have nothing for a downpayment when you find that dream house.
Saving is specific to each person's financial situation. The general rules are to put at least as much into your company retirement plan to get the full match of funds. The ROTH IRA is about the best thing congress has given us, so I applaud you in starting one. Saving outside of retirement is very importants due to your stated goals. I don't know how old you are, but I am assuming in your 20s, so you have lots of time to fund retirement, but the early years are most important. Once you have contributed to work retirment, paid living expenses and loans, continue to contribute to emergency funds until you have 6 months of "Net" income. During this time, begin to think about and research different brokerage and mutual sites such as eTrade, Vanguard and Fidelity. They have lots of tools to get you started. Be concious of your risk tolerance and when you might need the money. Investments are a long term proposition and not good for short term savings goals.
Thumbs up to Deborah's advice on the emergeny fund. Sooooo boring but so wonderful if and when you need it.
Moira, yes, try to concentrate on building up "cash." It goes without saying that you need to make sure you take advantage of the matching programs through work. Once you've put in enough to get the full match, consider putting some of the excess - money that would have gone into a 401 - into savings. You will sacrifice on taxes (pay more) and return (may earn less) but if you position yourself to buy a home that can be "yours," the long-term benefits are worth it.
Thanks very much guys. I think we're going to wrap up at the top of the hour -- anyone who'd like to weigh in for Moira, please do.
Anyone lurking who's been holding off on asking a question can go ahead and do that, too.
I would like to ask the advisors what they are doing for yield on cash savings. Ally Bank seems to have some of the better, but still low, rates. Have any of you discoverd a honey pot?
You have several choices for retirement plans. If you REALLY want to put away a lot for retirement quickly, you could use a solo Defined Benefit Plan, but it requires some help and expense to set up. Other choices that are also good are Owner 401ks, SEP IRAs and even the Traditional IRA. I am a big fan of SEPs because they are low cost, easy to set up and you can contribute for this year up to April 15 of next year. Depending on how much you make from self-employment, you can often put away more than you can in a Traditional IRA.
Slim Jim, yes, you could consider the SEP-IRA or even a Roth, depending on how much you want to put away. The SEP allows for larger deferrals but is tax-deferred. The Roth limits the amount going in but would be tax-free.
I have lots of retiress as clients, that is the bane of our existance. We use some of vanguard short term bond funds for part of the cash position. Credit unions often pay a little more.
I am going to leave, as you are closing shop. But, Jim, if you do not have employees, a SEP is the way to go.
Deborah, we are using short term bond funds as well. At least I'm not missing anything. Low mortgage rates for home buyers usually means low interest rates for the rest of us on earnings. And so it goes...
Good caution on the employee issue with a SEP
Thanks very much to Bobbie Munroe of Fraser Financial in Atlanta, GA; Debbie Frazier of Frazier Financial Consultants in Chapel Hill, NC; Matthew Kovalcik of Kovalcik and Geraghty Wealth Partners in Bluffton, SC; and Lea Ann Knight of Garrison Knight Financial Planning LLC in Waltham, MA.
We appreciate your insights and thanks to all our commenters. This chat will be saved as a transcript at live.kiplinger.com
Our thanks to you Kiplinger...and for the link on earning more interest. Kiplinger is always a great resource.