Sitting, I like to see people slowly get back into the market rather than putting all of their money in at once.
Also, I would make sure that you leave some of that money in the money market as an emergency fund. I recommend at least 6 months of expenses, however, if you are single or concerned about job security, a year's worth of expenses should be covered by this money.
Sitting, my advise is assuming that the money market account is your only savings vehicle in a taxable account.
Pat, here's a question for you from Colleen
Colleen, I understand the concern that you feel about the markets. The best remedy for that is to take your attention off of the day to day movements of the market. You would not believe how many folks believe that 2012 was not a good year for investing, yet the S&P 500 returned 13.4% in 2012. Observing volatility is not good, it's sort of like rolling around in poison ivy and then wondering why you have a rash - just avoid the exposure. That said, be sure that your investments reflect your ability to withstand volatility, and remember that your investment time horizon is not just until retirement, but for your entire lifespan.
Steve, here's one from Gin Gin
Gin Gin: If I were going to do a Roth conversion in your tax situation, I would do so *now* in the year *before* your must begin taking RMDs. That way, you will have more "head room" within the 15% tax bracket for this year's conversion. As to doing further conversions in 2014 and beyond, also within the 15% tax bracket, please note that 1) doing a Roth conversion in one year will decrease (slightly) the size of RMDs in future years, and 2) Roth IRAs do not have RMDs. Also, having a tax-free Roth IRA in additon to a tax-deferred traditional IRA will give you flexibility regarding from where you might take an above-RMD distribution if that should ever be needed. Finally, if your heirs are likely to be in a higher tax bracket than you, voluntarily pre-paying tax when you make the Roth conversion can provide a tax benefit to them.
Pat, you can take this one from DC
DC, given the craziness that we have seen in past housing markets, I would like to deflect investors from the idea that a personal residence is an investment. The most valid reasons for owning a home are not financial - good school district, nice neighborhood, amenities, stability. The consequence of that "quality of life" decision is financial, of course (price, mortgage, insurance). I can understand the buying pressure that you feel due to the fact that housing markets are starting to recover. However, I would hate to see you transfer a chunk of your future retirement income to an illiquid asset (a home) which may or may not "pay you back" later on. If you want to use your 401k you could consider taking a loan from your plan, rather than an outright distribution (you cannot borrow against an IRA), if your plan allows, to help you make the down payment.
Francine, here's a question for you from Gianluca
Gianluca, An annuity is an investment vehicle and does not offer you any diversification as to your investments. If you note my previous comment, it is often laden with considerable fees. Therefore, I don't agree with your idea at all. Without knowing more about your situation, I cannot give you specific advice, however, there are Roth IRA's, Traditional IRA's, Roth 401k's (if your employer offers this) plus of course the Traditional 401k. As for the 401k's, there is nothing wrong with contributing more than the company match, however, if you qualify, IRA's could offer your a great deal more investment options that your 401k might. Hope this helps!
Annuities do offer you the option of and income stream which, the longer you live, the more you can benefit from them.
Francine, here's a question for you from Sisi
Sisi, I think that having your husband contribute to an IRA is a great idea. There are both Roth and Traditional IRA's. Without knowing a lot more details, I cannot advise which to take, however, it would be great for your husband to start saving for retirement as well. Best of luck!
And Pat, when you're ready, here's one from Dale
Dale, congratulations on getting out of debt and taking steps to create a better financial situation for yourself. Although saving into retirement accounts is a great idea, due to the tax deferral, there are some restrictions on how much you can save. Your employer does not offer a retirement plan, but since you are employed and not self-employed, the option for you is a Roth IRA (your income is too high to use a regular deductible IRA) - the maximum contribution in 2013 for folks over 50 is $6,500 per year. Your wife is self employed, but you mentioned that she owns a cleaning company - which may possibly mean that she has employees. Any sort of retirement plan that she would set up must also benefit her employees. If this would cause administrative issues or negatively impact the business cash flow, she may not want to do this. So her option would also be a Roth IRA. After that, you can look at some other tools to help you save more for retirement, depending on how much you need to defer income, and what you have left after your commitments to Roth IRAs and your regular living expenses. You can pick some good no load balanced mutual funds that can be accessed directly from the fund company (try Vanguard or T. Rowe Price). Or, you could (gasp) consider a low cost annuity (do NOT purchase one from a broker) if you want to lock up the money a bit more. See if there's a fee only planner in your area who will work with you on an hourly basis to figure out a good strategy. Remember that your investment time horizon isn't just to retirement, it extends over your entire lifetime (although that's a less predictable milestone).
Steve, how about you take this next one from Chris
Chris: It is exceeding difficult to pick "winning" mutual funds. Academic research is mixed as to whether it is even possible. Although there is something to the "momentum" theory that what has done well recently will keep doing so for a while longer, there is also something to be said for "mean reversion" where what has done poorly will return to favor, giving you out-sized returns as it does so. The one thing that is predicatable is fees: a low-cost fund this year is likely to be a low-cost fund next year, and a high-cost fund is likely to continue to be a high-cost fund, eating into your investment returns. This is important because as a group low-cost funds outperform high-cost funds by roughly the amount of the fee differential. For further criteria, you might take a look at Morningstar.com or the AAII.com.
Francine, here's our next question from Mindy
Mindy, I suggest meeting with a fee-only financial planner who can assess your situation in detail. You are at an age where you still have some time to save more toward retirement if necessary. Nobody wants to outlive their money, thus, it's well worth the time and expense involved. Wish I was in CA! I'm in Chicago watching a snowstorm outside my window as I respond to you!
Steve, here's a question from Jem
Jem: Who is the custodian of your IRA? Surely they will have available for purchase a low-cost, broadly diversified fund with a minimum of $2,000 or less. If not, why don't you switch to a more investor-friendly custodian such as Vanguard?
Francine, you can take this one from Mark
Wow, Mark, you have given this a lot of thought. When you buy an index, you buy the whole market. Mutual funds, while containing many different investments, are designed by investment professionals. Sometimes this works in their favor, sometimes not. ETF's can either be very specific or quite general in their investments. Personally, I see nothing wrong with any of these vehicles. In the case of mutual funds, I prefer to deal with no load funds that are not laden with high fees. Many investors like to use a combination of the above. At any rate, I suggest doing what you are most comfortable with. Perhaps a fee-only financial planner could offer you addtional assistance.
Mark: Allow me to add to Francine's excellent response: Picking a "winning" mutual fund manager is easy after the fact but not so easy to predict who will beat the market going forward -- especially after the inevitably higher fees associated with both the management and the (hidden) cost of trading in an actively managed fund. In short, if you can indeed pick a winning active fund manager, go for it. Just lean toward an especially low-cost manager for a give asset class or sub-class.
Pat, here's one from Barry B