How and where to invest Cash Savings
How and where to invest Cash Savings
I have been working overseas for the past 2 years and saved in the process around $225,000, currently sitting in Saving account earning 4% interest rate. I have a 401K with around $260,000 and roth Ira with around $45,000 with additional $125,000 in brokerage accounts. My current protofolio is 50% stocks and 50% bonds diversified between US and international one. I own a house in the US which currently I am renting it and will be paid off in less than two years. Age is 54 years old and hope to retire at age 62. My current employer does not offer any retirement plans (no 401k).
I appreciate an advice on what to do with this money and how to proceed with future savings. Currently I max out my Roth Ira contribution every year.
I appreciate an advice on what to do with this money and how to proceed with future savings. Currently I max out my Roth Ira contribution every year.
Last edited by ragabnh on Sun Nov 28, 2010 3:56 am, edited 1 time in total.
Paying off the house
Have you considered just taking the cash to pay off the house? You don't mention your mortgage rate but whatever it is you probably are not getting any deduction from it.
For any remaining money, and assuming you have enough cash set aside to do things like purchase a car when you move back to the US, I suggest investing the rest. It is part of your total portfolio of the 401k, roth, and taxable brokerage account. The money is basically equal to the taxable brokerage account and is really fixed income so your actual asset allocation is probably far more conservative than 50/50. You want to hold tax efficient equities in the brokerage account and hold your fixed income in the 401k and roth as much as possible.
I hope this makes sense.
Laura
For any remaining money, and assuming you have enough cash set aside to do things like purchase a car when you move back to the US, I suggest investing the rest. It is part of your total portfolio of the 401k, roth, and taxable brokerage account. The money is basically equal to the taxable brokerage account and is really fixed income so your actual asset allocation is probably far more conservative than 50/50. You want to hold tax efficient equities in the brokerage account and hold your fixed income in the 401k and roth as much as possible.
I hope this makes sense.
Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.
Re: Paying off the house
Thanks Laura,
I owe on the house less than $30,000 and the interest rate is 5%, I claim standard deduction, the house is worth around $250,000. The rent covers the mortgage payment anyway.
When you say tax efficient, do you mean ETF's ?
I am reluctant to jump into the market at this time, as I have a feeling it might drop, do you think I should just invest equal amounts over long period say one year or wait for a significant drop and do it all at once.
I owe on the house less than $30,000 and the interest rate is 5%, I claim standard deduction, the house is worth around $250,000. The rent covers the mortgage payment anyway.
When you say tax efficient, do you mean ETF's ?
I am reluctant to jump into the market at this time, as I have a feeling it might drop, do you think I should just invest equal amounts over long period say one year or wait for a significant drop and do it all at once.
Last edited by ragabnh on Sat Nov 27, 2010 8:53 am, edited 1 time in total.
Thanks SamSamLJ wrote:Just a quick check on your Roth contributions. If you're claiming the foreign earned income exclusion on your taxes you may not be able to contribute to a Roth. If, however, you're taking the foreign tax credit instead then there should be no problem.
Cheers,
Sam
I claimed the foreign earned income exclusion, however my wife was still working in the US last year thus I was able to contribute. This is not the case though this year, I am glad that you brought it to my attentions.
Since I am renting my house in the US and receiving monthly income, should'nt that qualify me for Roth IRA contribution?
Last edited by ragabnh on Sat Nov 27, 2010 4:48 pm, edited 2 times in total.
Faltuk1,faltuk1 wrote:"Saving account earning 4%"
Thats a pretty good deal. Are you sure this is a saving account? Anyhting earning more than 2% currently has to be lot more risky than saving account.
Correct it is a saving account earning 4% compounded quarterly, it is in the local currency around here which is anyway tied to the dollar through fixed exchange rate, therefore it moves up and down with the dollar movement.
passive income
Your income from the rental of your home would not count as earned income so you cannot contribute to a roth on that basis.
Laura
Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.
It depends! He may be able to contribute to a Roth IRA even though he claims the foreign earned income exclusion if his earned income is not all excluded from taxation (max. exclusion for 2010 is $91500).SamLJ wrote:Just a quick check on your Roth contributions. If you're claiming the foreign earned income exclusion on your taxes you may not be able to contribute to a Roth. If, however, you're taking the foreign tax credit instead then there should be no problem.
Cheers,
Sam
4%!! cannot beat that...ragabnh wrote:Faltuk1,faltuk1 wrote:"Saving account earning 4%"
Thats a pretty good deal. Are you sure this is a saving account? Anyhting earning more than 2% currently has to be lot more risky than saving account.
Correct it is a saving account earning 4% compounded quarterly, it is in the local currency around here which is anyway tied to the dollar through fixed exchange rate, therefore it moves up and down with the dollar movement.
ragabnh wrote:The rate is for an overseas bank and is not applicable to the US, and it is in local currency around here.dmcmahon wrote:Please tell me where I can get 4% on a (US $) savings account. I wouldn't need to invest anywhere else!
Can you open an account even if you were not a resident? I know you can in Western Europe.
I am not sure, I don't think that you can open an account on line as I have to do it in a branch, however try IBQ.com.qa and it is called super saving account.JD wrote:ragabnh wrote:The rate is for an overseas bank and is not applicable to the US, and it is in local currency around here.dmcmahon wrote:Please tell me where I can get 4% on a (US $) savings account. I wouldn't need to invest anywhere else!
Can you open an account even if you were not a resident? I know you can in Western Europe.
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Just curious, is there an equivalent of the FDIC in Qatar? Are savings accounts insured at all in the event of a bank failure?ragabnh wrote:I am not sure, I don't think that you can open an account on line as I have to do it in a branch, however try IBQ.com.qa and it is called super saving account.JD wrote:ragabnh wrote:The rate is for an overseas bank and is not applicable to the US, and it is in local currency around here.dmcmahon wrote:Please tell me where I can get 4% on a (US $) savings account. I wouldn't need to invest anywhere else!
Can you open an account even if you were not a resident? I know you can in Western Europe.
I have asked this same question and found out that all banks around here are backed by Qatar Central Bank, which means the government will fully back the bank in case of difficulties, now Qatar is one of the richest countries and I believe it has the highest GNP per capita in the world. I don't want to sound like I am advertising for the bank, but I believe investements are secure around here.citydweller00 wrote:ragabnh wrote:I am not sure, I don't think that you can open an account on line as I have to do it in a branch, however try IBQ.com.qa and it is called super saving account.JD wrote:ragabnh wrote:The rate is for an overseas bank and is not applicable to the US, and it is in local currency around here.dmcmahon wrote:Please tell me where I can get 4% on a (US $) savings account. I wouldn't need to invest anywhere else!
Can you open an account even if you were not a resident? I know you can in Western Europe.
Just curious, is there an equivalent of the FDIC in Qatar? Are savings accounts insured at all in the event of a bank failure?
Last edited by ragabnh on Sun Nov 28, 2010 7:34 am, edited 2 times in total.
citydweller00 wrote:ragabnh wrote:I am not sure, I don't think that you can open an account on line as I have to do it in a branch, however try IBQ.com.qa and it is called super saving account.JD wrote:ragabnh wrote:The rate is for an overseas bank and is not applicable to the US, and it is in local currency around here.dmcmahon wrote:Please tell me where I can get 4% on a (US $) savings account. I wouldn't need to invest anywhere else!
Can you open an account even if you were not a resident? I know you can in Western Europe.
Just curious, is there an equivalent of the FDIC in Qatar? Are savings accounts insured at all in the event of a bank failure?
Ragabnh will probably comment on this. But I believe the banks in that part of the world are “relatively” safe. They are backed by the full faith of the Royal Family.
Correct, see my post above.JD wrote:citydweller00 wrote:ragabnh wrote:I am not sure, I don't think that you can open an account on line as I have to do it in a branch, however try IBQ.com.qa and it is called super saving account.JD wrote:ragabnh wrote: The rate is for an overseas bank and is not applicable to the US, and it is in local currency around here.
Can you open an account even if you were not a resident? I know you can in Western Europe.
Just curious, is there an equivalent of the FDIC in Qatar? Are savings accounts insured at all in the event of a bank failure?
Ragabnh will probably comment on this. But I believe the banks in that part of the world are “relatively” safe. They are backed by the full faith of the Royal Family.
ragabnh wrote:Ihave asked this same questions and found out that all banks around here are backed by Qatar Central Bank, which means the government will fully back the bank in case of difficulties, now Qatar is one of the richest countries and I believe it has the highest GNP per capita in the world. I don't want to sound like I am advertising for the bank, but I believe investements are secure around here.citydweller00 wrote:ragabnh wrote:I am not sure, I don't think that you can open an account on line as I have to do it in a branch, however try IBQ.com.qa and it is called super saving account.JD wrote:ragabnh wrote: The rate is for an overseas bank and is not applicable to the US, and it is in local currency around here.
Can you open an account even if you were not a resident? I know you can in Western Europe.
Just curious, is there an equivalent of the FDIC in Qatar? Are savings accounts insured at all in the event of a bank failure?
I believe that you’re correct. That 4% is really interesting especially at this time. Is there anything hidden such as you have to make 10 ATM withdrawals, make online deposit, etc..I see the minimum is 10000 what is the max? This is a good deal, I believe unless it is just a promotional and only for certain period.
I am not aware of any maximum amount and there is no hidden fees or any hidden conditions related to deposits or withdrawls, however they reserve the right to change the interest rate and you receive your interest in quarterly basis rather than monthly.JD wrote:ragabnh wrote:Ihave asked this same questions and found out that all banks around here are backed by Qatar Central Bank, which means the government will fully back the bank in case of difficulties, now Qatar is one of the richest countries and I believe it has the highest GNP per capita in the world. I don't want to sound like I am advertising for the bank, but I believe investements are secure around here.citydweller00 wrote:ragabnh wrote:I am not sure, I don't think that you can open an account on line as I have to do it in a branch, however try IBQ.com.qa and it is called super saving account.JD wrote:
Can you open an account even if you were not a resident? I know you can in Western Europe.
Just curious, is there an equivalent of the FDIC in Qatar? Are savings accounts insured at all in the event of a bank failure?
I believe that you’re correct. That 4% is really interesting especially at this time. Is there anything hidden such as you have to make 10 ATM withdrawals, make online deposit, etc..I see the minimum is 10000 what is the max? This is a good deal, I believe unless it is just a promotional and only for certain period.
You're probably getting the sense from the way this has drifted off topic that your 4% interest rate is pretty damned hard to beat here in the US. To get a rate approaching that you'll have to lock your money up for 7-10 years. Of course, you have some exchange-rate risk - if US interest rates ever go back up, the currency your account is in could sink. You need to sharpen up your original question, are you asking for suggestions on the assumption that you'd bring all the monies back to the US?
The currency in my account is tied to the dollar through fixed exchange rate.dmcmahon wrote:You're probably getting the sense from the way this has drifted off topic that your 4% interest rate is pretty damned hard to beat here in the US. To get a rate approaching that you'll have to lock your money up for 7-10 years. Of course, you have some exchange-rate risk - if US interest rates ever go back up, the currency your account is in could sink. You need to sharpen up your original question, are you asking for suggestions on the assumption that you'd bring all the monies back to the US?
I want to bring back the money to the US since there is a possibility I may return back to the US within a year.
Another idea I had is to invest in rental property, I appreciate any input here.
Last edited by ragabnh on Sun Nov 28, 2010 7:26 am, edited 2 times in total.
Yes, my plan is to let the rent pay off the mortgage,abuss368 wrote:How about letting the rent funds pay off the mortgage?
Consider averaging into the market over time rather than all at once.
Mr. Bogle recomends your age in bonds as a good starting point. This is your most important decision.
I will consider the purchase of some Ibonds and may be tips.
Last edited by ragabnh on Sun Nov 28, 2010 7:26 am, edited 1 time in total.
I bonds
I bonds are limited to $5k electronic and $5k paper per person per year so this won't work well for your investing. TIPS are best held in tax advantaged accounts.
The rent can pay off the mortgage but if you are planning to invest the money over time I am not sure why you don't just take the money today and pay off the mortgage. Then, take the rent payment and invest it each month as it arrives. You probably end up about the same place in the end.
Laura
The rent can pay off the mortgage but if you are planning to invest the money over time I am not sure why you don't just take the money today and pay off the mortgage. Then, take the rent payment and invest it each month as it arrives. You probably end up about the same place in the end.
Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.
Re: I bonds
I like this idea. . .Laura wrote: The rent can pay off the mortgage but if you are planning to invest the money over time I am not sure why you don't just take the money today and pay off the mortgage. Then, take the rent payment and invest it each month as it arrives. You probably end up about the same place in the end.
"I would rather die with money, than live without it...." - Bogleheads member Ron |
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A time to EVALUATE your jitters https://www.bogleheads.org/forum/viewtopic.php?p=1139732#p1139732
Re: I bonds
Your suggestion about mortgage pay off makes sense, I will certainly think about it.Laura wrote:I bonds are limited to $5k electronic and $5k paper per person per year so this won't work well for your investing. TIPS are best held in tax advantaged accounts.
The rent can pay off the mortgage but if you are planning to invest the money over time I am not sure why you don't just take the money today and pay off the mortgage. Then, take the rent payment and invest it each month as it arrives. You probably end up about the same place in the end.
Laura
One more question, what kind of bonds I can purchase in a tax advantaged account?
Tax advantaged bonds
I am not sure if your question relates to the type of bonds like treasury, corporate, or inflation protected bonds or whether it relates to how you buy bonds in a tax advantaged account.
You can place any bonds but tax exempt in a tax advantaged account. To buy individual bonds you would need to hold the money at a broker who can buy individual bonds for you. On the other hand, it is very easy to invest in a bond fund like the Vanguard Total Bond Market fund or the Vanguard Inflation Protected Securities fund.
I am a big fan of simplicity and prefer to let the mutual fund company handle bond purchases for me.
Laura
You can place any bonds but tax exempt in a tax advantaged account. To buy individual bonds you would need to hold the money at a broker who can buy individual bonds for you. On the other hand, it is very easy to invest in a bond fund like the Vanguard Total Bond Market fund or the Vanguard Inflation Protected Securities fund.
I am a big fan of simplicity and prefer to let the mutual fund company handle bond purchases for me.
Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.
Re: Tax advantaged bonds
Laura,
Can I buy ETF's that cover the same bond funds that you mentioned above, if yes can you give the name of these equivalent ETF's.
Sometimes I cannot buy Vanguard Mutual funds with my brokere (as it is not available).
Thanks for all your advice, I really appreciate your time and patience with me.
Can I buy ETF's that cover the same bond funds that you mentioned above, if yes can you give the name of these equivalent ETF's.
Sometimes I cannot buy Vanguard Mutual funds with my brokere (as it is not available).
Thanks for all your advice, I really appreciate your time and patience with me.
Last edited by ragabnh on Sun Nov 28, 2010 7:54 am, edited 1 time in total.
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Actually I prefer to invest in Mutual funds and Bonds rather than CD's to maintain the 50/50 balance I am seeking, I might also consider buying a rental property (real estate is cheap now adays), still thinking about all options available.beareconomy wrote:If you just want the cash safe, why don't you ladder a few 7 year cds at penfed credit union which is paying 3.49%. The penalty is 1 year of interest if broken early, but even with the penalty if you hold for three years, you still get a better interest rate safely than anywhere else.
Last edited by ragabnh on Mon Nov 29, 2010 4:46 am, edited 1 time in total.
I would say u can do a tweenie type of investment which would be NYSE listed fixed rate preferred stocks in banks, financials, utilities REITS, etc. They are usually $25 pars some are structured like equities, others like senior debt and others like junior subordinated.
Just to give u an idea, I recently bought a goldman senior note ticker: GSF yielding about 6.40% and a national bank of greece preferred ticker: NBG-A yielding over 11%. I am not recommending these, they are simply examples of recent purchases based off my risk tolerance.
There are also preferred stock ETF's such a PFF, PGF and PGX
An excellent starting reference point to educate yourself is
www.quantumonline.com
Just to give u an idea, I recently bought a goldman senior note ticker: GSF yielding about 6.40% and a national bank of greece preferred ticker: NBG-A yielding over 11%. I am not recommending these, they are simply examples of recent purchases based off my risk tolerance.
There are also preferred stock ETF's such a PFF, PGF and PGX
An excellent starting reference point to educate yourself is
www.quantumonline.com