$14,000 inheritance wind fall

[fabis]

coming into some money ~14k.

28 years old, no debt, stable income, not hurting for money.... established emergency fund, only started investing a month or two ago.

currently 5% w/ company match into 401k. (70% VASGX/30% VSCGX)

also on my way to max out my roth (VFIFX) for the $5,500 this year. (3,750 balanace)


My original plan was to open up a taxable account for some play money while waiting on the ripe age to start withdrawals. It was going to be 100% VTSMX with around ~6k to start but was wondering if it would be better if i split it 50/50 with VTSMX and VWITX or even 60/40??


Basically i want to know if it is smart to start a taxable account with VTSMX and VWITX and at 60/40 or 50/50 splits, or just VTSMX?

I planned on investing $6000 in Taxable account, maxing out the roth, and laddering cd's with my credit union on the remainder.


Does this seem like a solid plan?

[Jags4186]

Seems like a lot of work for $14,000.

Max the Roth today for 2017.

Max your 401k--use the remainder of the $14,000 to bridge the gap if maxing your 401k would cause you to be short on your bills. If it won't cause you to be short on your bills then invest it all in taxable and then on January 2nd 2018 put another $5500 into your Roth.

[JW-Retired]

Max the Roth today for 2017.

Max your 401k--use the remainder of the $14,000 to bridge the gap if maxing your 401k would cause you to be short on your bills.

fabis,
This. No reason to mess with a taxable account if you are not even close to maxing the 401k & Roth.
JW

[celia]

After maxing the Roth, I would rollover $10K from the 401K to the Roth IRA and use some of the rest for the conversion taxes (assuming your 401K plan allows this). This assumes you are in the 15% or 25% tax bracket (making the federal taxes be $1,500 or $2,500). In 30 or 40 years, the compounding on that Roth will be more appreciated that the compounding on the 401K (where every dollar will be taxed on withdrawal).

[PFInterest]

just max out 401k. use 14K to continue living. pay yourself first!

[Marjimmy]

Agreed with the above. Invest it and pretend like your never had it.

[Earl Lemongrab]

After maxing the Roth, I would rollover $10K from the 401K to the Roth IRA and use some of the rest for the conversion taxes (assuming your 401K plan allows this). This assumes you are in the 15% or 25% tax bracket (making the federal taxes be $1,500 or $2,500). In 30 or 40 years, the compounding on that Roth will be more appreciated that the compounding on the 401K (where every dollar will be taxed on withdrawal).

It's not allowed to distribute employee deferrals while still employed. It's possible that the company match would be available.

[GulfCoast]

I'm not so sure I would immediately plug this into retirement savings that you can't access again until you are 59 1/2. You're 28, do you plan to get married some day or are you? Buy a house? I don't see why you wouldn't invest it in a taxable account for money you may need in your life journey.

[saltycaper]

Though there are certain life circumstances where you can tap retirement accounts without penalty, I still like having a taxable investment account that I know I can access without restrictions (beyond considering tax consequences). If the 14K wasn't a lot compared to my income, I would put it all in stocks. Otherwise I'd add some CDs or munis, but I wouldn't bother using both.

[ruralavalon]

Max the Roth today for 2017.

Max your 401k--use the remainder of the $14,000 to bridge the gap if maxing your 401k would cause you to be short on your bills.

fabis,
This. No reason to mess with a taxable account if you are not even close to maxing the 401k & Roth.
JW

I agree. Increase your 401k contributions to get to the employee maximum of $18k per year. If necessary use the windfall money to pay living expenses you would otherwise have paid out of your paycheck.

Don't do taxable investing if you are not maxing your 401k. If you have no definite purpose for the money at a particular time in the future, then invest the money long-term "as if" for retirement.

What is your desired asset allocation?