Investment option aside from 401k.

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Topic Author
StevenNJ1
Posts: 270
Joined: Fri Apr 04, 2014 12:56 pm

Investment option aside from 401k.

Post by StevenNJ1 »

This may not be the most scientific approach, but please bare with me. Looking to invest in more or less safe option instead of money sitting collecting just 2.25% in savings account.

In my late 30s. No debt other than mortgage at 3.75%.

Currently have my 2 401k plans invested in;
PRNHX - Mid-Cap Growth - Unable to contribute more
BASMX - Large Blend - Unable to contribute more
GRMSX - Large Blend
VISVX - Small Value

Now, I am looking to invest a bit into taxable account such as VHDYX - Large Value. More or less safe, low expense, dividends? Considered diverse enough compared to my other investments>?

thank you.
mhalley
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Joined: Tue Nov 20, 2007 6:02 am

Re: Investment option aside from 401k.

Post by mhalley »

No stock mutual fund is “safe”. It dropped 32.5% in 2008. In addition, bogleheads are more inclined to be total return investors rather than dividend investors. Additionally, high dividend funds might be better in tax advantaged accounts. I would recommend the total stock market fund. Low er, good tax efficiency, terrific diversification.
Flyer24
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Re: Investment option aside from 401k.

Post by Flyer24 »

If you are looking for a safe investment, it is not the stock market. What is the purpose of the investment and time frame?
Topic Author
StevenNJ1
Posts: 270
Joined: Fri Apr 04, 2014 12:56 pm

Re: Investment option aside from 401k.

Post by StevenNJ1 »

Flyer24 wrote: Wed Apr 17, 2019 1:04 am If you are looking for a safe investment, it is not the stock market. What is the purpose of the investment and time frame?
I have enough saved up as emergency cash. Now I have 50k+ and earning more to invest somewhere. My options are either placing money into savings account tat gives me 2.3% return, pay off mortgage faster but there my rate is 3.75%, considering inflation, may not be the best idea to pay it off fast. I already max out my 401k. Not able to do Trad IRA due to my high salary. Don't want to do Roth IRA either for now. Simply looking to place the extra cash into something more or less safe where I can always take it out if need be. I am in late 30s, don't mind waiting 10yr to recover if stock market takes a hit.
mhalley wrote: Wed Apr 17, 2019 12:51 am No stock mutual fund is “safe”. It dropped 32.5% in 2008. In addition, bogleheads are more inclined to be total return investors rather than dividend investors. Additionally, high dividend funds might be better in tax advantaged accounts. I would recommend the total stock market fund. Low er, good tax efficiency, terrific diversification.
Which total stock market fund are you referring to? Wouldn't it be less diversification considering where my current 401k funds are?

Thanks.
lakpr
Posts: 7139
Joined: Fri Mar 18, 2011 9:59 am

Re: Investment option aside from 401k.

Post by lakpr »

What is your mortgage balance? The TCJA has made the mortgage interest mostly non-deductible. It is deductible only to the extent that the mortgage interest + property taxes up to $10k exceed $24,600. Given the SALT cap of $10,000, your mortgage interest should exceed on an annual basis $14,600. That computes to a mortgage balance of $389,333. So only on the amount above this amount you get any tax benefit.

Being that 3.75% is an after-tax rate (likely, unless you bought a mansion and the mortgage balance is $750k), the taxable equivalent would have to produce 5.2% or higher. Without risk. As things stand now, the safe instruments like money markets, treasuries etc. are yielding half that.

Paying off the mortgage makes a lot of sense before you start investing. This is guaranteed return.
lakpr
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Joined: Fri Mar 18, 2011 9:59 am

Re: Investment option aside from 401k.

Post by lakpr »

StevenNJ1 wrote: Wed Apr 17, 2019 8:11 am Which total stock market fund are you referring to? Wouldn't it be less diversification considering where my current 401k funds are?
If I were you, I would simplify the 401k funds. Sounds like you have two separate 401k plans, one presumably from a former employer since you said you are unable to contribute. You have tried to invest in only narrow segments of the market in both plans. Boglehead philosophy is to buy the whole market, not individual slices.

Roll the old 401k funds to the new plan, and within the new plan buy total stock market (or close to it), and total bond market, and optionally total international stock market. Read the wiki page on 3-fund portfolio. Your investment plan should only consist of what exact proportions you want to invest in each of these funds
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ruralavalon
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Re: Investment option aside from 401k.

Post by ruralavalon »

StevenNJ1 wrote: Tue Apr 16, 2019 4:47 pm This may not be the most scientific approach, but please bare with me. Looking to invest in more or less safe option instead of money sitting collecting just 2.25% in savings account.

In my late 30s. No debt other than mortgage at 3.75%.

Currently have my 2 401k plans invested in;
PRNHX - Mid-Cap Growth - Unable to contribute more
BASMX - Large Blend - Unable to contribute more
GRMSX - Large Blend
VISVX - Small Value

Now, I am looking to invest a bit into taxable account such as VHDYX - Large Value. More or less safe, low expense, dividends? Considered diverse enough compared to my other investments>?

thank you.

StevenNJ1 wrote: Wed Apr 17, 2019 8:11 am . . . . .
I have enough saved up as emergency cash. Now I have 50k+ and earning more to invest somewhere. My options are either placing money into savings account tat gives me 2.3% return, pay off mortgage faster but there my rate is 3.75%, considering inflation, may not be the best idea to pay it off fast. I already max out my 401k. Not able to do Trad IRA due to my high salary. Don't want to do Roth IRA either for now. Simply looking to place the extra cash into something more or less safe where I can always take it out if need be. I am in late 30s, don't mind waiting 10yr to recover if stock market takes a hit.
. . . . .
Why do you not want a Roth IRA?

In a taxable brokerage account at a low cost provider like Vanguard you could use very tax-efficient stock index funds. Examples include:
1) Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04% ; and
2) Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%.

No stock fund is safe.

For safety you could use a good bond fund. But for good tax-effiency the place to hold a bond fund is in your 401k, if a decent bond fund is offered there. What are the other funds offered in your current 401k plan? Please give fund names, tickers and expense ratios.

Or you could consider I-bonds from Treasury Direct. "I Bonds cannot be redeemed during the first year, and if you redeem them within the first five years after purchase, you lose the most recent three months' interest. When you redeem your I Bonds, you can never get back less than you invested, even if there was a long period of negative inflation (deflation)." Boglehead's wiki, "I Savings Bonds".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
mega317
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Re: Investment option aside from 401k.

Post by mega317 »

StevenNJ1 wrote: Wed Apr 17, 2019 8:11 am Simply looking to place the extra cash into something more or less safe where I can always take it out if need be.... don't mind waiting 10yr to recover if stock market takes a hit.
This does not compute. Do you want to be able to "always take it out" (the inference is you want basically the same nominal value you started with) or are you ok waiting 10 years? Because you can "always take out", i.e. sell, a stock investment even if it has crashed 99%. Perhaps your definition of safe is different from mine. Please elaborate.

There is literally no reason for you to not use a Roth. Even if you contribute and just hold a money market fund, and then can take contributions out penalty-free, or change to a different investment if/when you change plans later.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
mega317
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Joined: Tue Apr 19, 2016 10:55 am

Re: Investment option aside from 401k.

Post by mega317 »

ruralavalon wrote: Wed Apr 17, 2019 11:46 am For safety you could use a good bond fund. But for good tax-effiency the place to hold a bond fund is in your 401k, if a decent bond fund is offered there.
This is good advice, as always from ruralavalon, but with the caveat that many, especially younger, investors don't have a large enough taxable account that they are willing to hold stocks. But they may be ok with a little more risk than a 0 duration instrument. Also in a very high tax bracket munis in taxable might make more sense than stocks.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
Topic Author
StevenNJ1
Posts: 270
Joined: Fri Apr 04, 2014 12:56 pm

Re: Investment option aside from 401k.

Post by StevenNJ1 »

lakpr wrote: Wed Apr 17, 2019 9:42 am What is your mortgage balance? The TCJA has made the mortgage interest mostly non-deductible. It is deductible only to the extent that the mortgage interest + property taxes up to $10k exceed $24,600. Given the SALT cap of $10,000, your mortgage interest should exceed on an annual basis $14,600. That computes to a mortgage balance of $389,333. So only on the amount above this amount you get any tax benefit.

Being that 3.75% is an after-tax rate (likely, unless you bought a mansion and the mortgage balance is $750k), the taxable equivalent would have to produce 5.2% or higher. Without risk. As things stand now, the safe instruments like money markets, treasuries etc. are yielding half that.

Paying off the mortgage makes a lot of sense before you start investing. This is guaranteed return.
My current mortgage balance is about $350k. Only 2 years into paying it off. As of this moment, leaning towards adding extra $500 every month for principal, which will save 9-10 years off mortgage and about 90k in interest.
lakpr wrote: Wed Apr 17, 2019 9:55 am
StevenNJ1 wrote: Wed Apr 17, 2019 8:11 am Which total stock market fund are you referring to? Wouldn't it be less diversification considering where my current 401k funds are?
If I were you, I would simplify the 401k funds. Sounds like you have two separate 401k plans, one presumably from a former employer since you said you are unable to contribute. You have tried to invest in only narrow segments of the market in both plans. Boglehead philosophy is to buy the whole market, not individual slices.

Roll the old 401k funds to the new plan, and within the new plan buy total stock market (or close to it), and total bond market, and optionally total international stock market. Read the wiki page on 3-fund portfolio. Your investment plan should only consist of what exact proportions you want to invest in each of these funds
I considered rolling old 401k into the new one, but it did not make sense with the options available in new plan and expense ratios. For those reasons, I decided to keep old 401k as is.
ruralavalon wrote: Wed Apr 17, 2019 11:46 am
StevenNJ1 wrote: Tue Apr 16, 2019 4:47 pm This may not be the most scientific approach, but please bare with me. Looking to invest in more or less safe option instead of money sitting collecting just 2.25% in savings account.

In my late 30s. No debt other than mortgage at 3.75%.

Currently have my 2 401k plans invested in;
PRNHX - Mid-Cap Growth - Unable to contribute more
BASMX - Large Blend - Unable to contribute more
GRMSX - Large Blend
VISVX - Small Value

Now, I am looking to invest a bit into taxable account such as VHDYX - Large Value. More or less safe, low expense, dividends? Considered diverse enough compared to my other investments>?

thank you.

StevenNJ1 wrote: Wed Apr 17, 2019 8:11 am . . . . .
I have enough saved up as emergency cash. Now I have 50k+ and earning more to invest somewhere. My options are either placing money into savings account tat gives me 2.3% return, pay off mortgage faster but there my rate is 3.75%, considering inflation, may not be the best idea to pay it off fast. I already max out my 401k. Not able to do Trad IRA due to my high salary. Don't want to do Roth IRA either for now. Simply looking to place the extra cash into something more or less safe where I can always take it out if need be. I am in late 30s, don't mind waiting 10yr to recover if stock market takes a hit.
. . . . .
Why do you not want a Roth IRA?

In a taxable brokerage account at a low cost provider like Vanguard you could use very tax-efficient stock index funds. Examples include:
1) Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04% ; and
2) Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%.

No stock fund is safe.

For safety you could use a good bond fund. But for good tax-effiency the place to hold a bond fund is in your 401k, if a decent bond fund is offered there. What are the other funds offered in your current 401k plan? Please give fund names, tickers and expense ratios.

Or you could consider I-bonds from Treasury Direct. "I Bonds cannot be redeemed during the first year, and if you redeem them within the first five years after purchase, you lose the most recent three months' interest. When you redeem your I Bonds, you can never get back less than you invested, even if there was a long period of negative inflation (deflation)." Boglehead's wiki, "I Savings Bonds".
To be honest, aside from retirement investing benefit and tax saving benefit of 401k, which I almost max out, I did not want to do Roth IRA, instead I wanted to focus on paying my mortgage faster and saving money for a possible real estate investment. As in a way to diversify.

I am interested to diversify my "portoflio" in the following way.

1) Max out 401k. Focus on aggressive options. Avoid bonds.
2) Pay off mortgage in 20yrs instead of 30.
3) Save up to have 20% on real estate property purchase. (already have the money for this, now looking for deals)
4) Place the rest of money into an index fund or something to which I can contribute on a monthly basis and be able to take out penalty free (meaning, no IRA).

And so, considering that my 401k already invests in
PRNHX - Mid-Cap Growth - Unable to contribute more
BASMX - Large Blend - Unable to contribute more
GRMSX - Large Blend
VISVX - Small Value

I am trying to find a fund that is a bit different in terms of it's strategy/investments to have more or less stock market diverse portfolio. Also, if it's a Vanguard fund, I believe I'd have to open up a Vanguard account to avoid fees every time I add money to it?

Thank you.
zeal
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Re: Investment option aside from 401k.

Post by zeal »

StevenNJ1 wrote: Wed Apr 17, 2019 12:57 pm I am interested to diversify my "portoflio" in the following way.

1) Max out 401k. Focus on aggressive options. Avoid bonds.
2) Pay off mortgage in 20yrs instead of 30.
3) Save up to have 20% on real estate property purchase. (already have the money for this, now looking for deals)
4) Place the rest of money into an index fund or something to which I can contribute on a monthly basis and be able to take out penalty free (meaning, no IRA).
Contributions to a Roth IRA can be withdrawn at any time, penalty free (withdrawing earnings however will result in penalties/taxes unless you are age 59.5+). I agree with the other posters, there is no reason you shouldn't open a Roth IRA, as all its growth will be tax-free--this is part of the answer to #4 in your list I quoted. You can contribute up to $6k for the year 2019. I believe anything above the contribution limit would have to go to a taxable account, which can also be withdrawn from at any time but obviously is less tax-friendly.

The other part of the answer depends on where you open this account--if you open it at Vanguard, buy Vanguard index funds; if you open it at Fidelity, buy Fidelity index funds. My wife and I have accounts at both of these companies and used this list from the wiki to choose the index funds we invested in. These companies have some of the lowest available expense ratios, which is why we chose them. We went with total US stock for both accounts (VTSAX and FSKAX).
zlandar
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Re: Investment option aside from 401k.

Post by zlandar »

I don’t understand why you would not want to do a backdoor roth. There are very few ways that you can invest and have all the earnings tax-free. The only reason not to is if you have traditional IRA and/or SEP money which subjects you to a proportional tax if you convert a traditional IRA to roth.

Real estate investing is fine as long as it’s something you want to put the time into. It’s a lot more work than putting money into an index fund with a couple clicks.
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ruralavalon
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Location: Illinois

Re: Investment option aside from 401k.

Post by ruralavalon »

StevenNJ1 wrote: Wed Apr 17, 2019 12:57 pm
lakpr wrote: Wed Apr 17, 2019 9:42 am What is your mortgage balance? The TCJA has made the mortgage interest mostly non-deductible. It is deductible only to the extent that the mortgage interest + property taxes up to $10k exceed $24,600. Given the SALT cap of $10,000, your mortgage interest should exceed on an annual basis $14,600. That computes to a mortgage balance of $389,333. So only on the amount above this amount you get any tax benefit.

Being that 3.75% is an after-tax rate (likely, unless you bought a mansion and the mortgage balance is $750k), the taxable equivalent would have to produce 5.2% or higher. Without risk. As things stand now, the safe instruments like money markets, treasuries etc. are yielding half that.

Paying off the mortgage makes a lot of sense before you start investing. This is guaranteed return.
My current mortgage balance is about $350k. Only 2 years into paying it off. As of this moment, leaning towards adding extra $500 every month for principal, which will save 9-10 years off mortgage and about 90k in interest.
lakpr wrote: Wed Apr 17, 2019 9:55 am
StevenNJ1 wrote: Wed Apr 17, 2019 8:11 am Which total stock market fund are you referring to? Wouldn't it be less diversification considering where my current 401k funds are?
If I were you, I would simplify the 401k funds. Sounds like you have two separate 401k plans, one presumably from a former employer since you said you are unable to contribute. You have tried to invest in only narrow segments of the market in both plans. Boglehead philosophy is to buy the whole market, not individual slices.

Roll the old 401k funds to the new plan, and within the new plan buy total stock market (or close to it), and total bond market, and optionally total international stock market. Read the wiki page on 3-fund portfolio. Your investment plan should only consist of what exact proportions you want to invest in each of these funds
I considered rolling old 401k into the new one, but it did not make sense with the options available in new plan and expense ratios. For those reasons, I decided to keep old 401k as is.
ruralavalon wrote: Wed Apr 17, 2019 11:46 am
StevenNJ1 wrote: Tue Apr 16, 2019 4:47 pm This may not be the most scientific approach, but please bare with me. Looking to invest in more or less safe option instead of money sitting collecting just 2.25% in savings account.

In my late 30s. No debt other than mortgage at 3.75%.

Currently have my 2 401k plans invested in;
PRNHX - Mid-Cap Growth - Unable to contribute more
BASMX - Large Blend - Unable to contribute more
GRMSX - Large Blend
VISVX - Small Value

Now, I am looking to invest a bit into taxable account such as VHDYX - Large Value. More or less safe, low expense, dividends? Considered diverse enough compared to my other investments>?

thank you.

StevenNJ1 wrote: Wed Apr 17, 2019 8:11 am . . . . .
I have enough saved up as emergency cash. Now I have 50k+ and earning more to invest somewhere. My options are either placing money into savings account tat gives me 2.3% return, pay off mortgage faster but there my rate is 3.75%, considering inflation, may not be the best idea to pay it off fast. I already max out my 401k. Not able to do Trad IRA due to my high salary. Don't want to do Roth IRA either for now. Simply looking to place the extra cash into something more or less safe where I can always take it out if need be. I am in late 30s, don't mind waiting 10yr to recover if stock market takes a hit.
. . . . .
Why do you not want a Roth IRA?

In a taxable brokerage account at a low cost provider like Vanguard you could use very tax-efficient stock index funds. Examples include:
1) Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04% ; and
2) Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%.

No stock fund is safe.

For safety you could use a good bond fund. But for good tax-effiency the place to hold a bond fund is in your 401k, if a decent bond fund is offered there. What are the other funds offered in your current 401k plan? Please give fund names, tickers and expense ratios.

Or you could consider I-bonds from Treasury Direct. "I Bonds cannot be redeemed during the first year, and if you redeem them within the first five years after purchase, you lose the most recent three months' interest. When you redeem your I Bonds, you can never get back less than you invested, even if there was a long period of negative inflation (deflation)." Boglehead's wiki, "I Savings Bonds".
To be honest, aside from retirement investing benefit and tax saving benefit of 401k, which I almost max out, I did not want to do Roth IRA, instead I wanted to focus on paying my mortgage faster and saving money for a possible real estate investment. As in a way to diversify.

I am interested to diversify my "portoflio" in the following way.

1) Max out 401k. Focus on aggressive options. Avoid bonds.
2) Pay off mortgage in 20yrs instead of 30.
3) Save up to have 20% on real estate property purchase. (already have the money for this, now looking for deals)
4) Place the rest of money into an index fund or something to which I can contribute on a monthly basis and be able to take out penalty free (meaning, no IRA).

And so, considering that my 401k already invests in
PRNHX - Mid-Cap Growth - Unable to contribute more
BASMX - Large Blend - Unable to contribute more
GRMSX - Large Blend
VISVX - Small Value

I am trying to find a fund that is a bit different in terms of it's strategy/investments to have more or less stock market diverse portfolio. Also, if it's a Vanguard fund, I believe I'd have to open up a Vanguard account to avoid fees every time I add money to it?

Thank you.
If the goal is a "more or less stock market diverse portfolio", then:

1) in the old 401k sell T. Rowe Price New Horizons (PRNHX) and put everything into iShares Total US Stock Market Idx Inv A (BASMX);

2) in the new 401k sell Vanguard Small Cap Value Index Inv (VISVX) and put everything into Nationwide S&P 500 Index Svc (81% of U.S. stock market) (GRMSX); and

3) in a taxable brokerage account at Vanguard buy Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Topic Author
StevenNJ1
Posts: 270
Joined: Fri Apr 04, 2014 12:56 pm

Re: Investment option aside from 401k.

Post by StevenNJ1 »


If the goal is a "more or less stock market diverse portfolio", then:

1) in the old 401k sell T. Rowe Price New Horizons (PRNHX) and put everything into iShares Total US Stock Market Idx Inv A (BASMX);

2) in the new 401k sell Vanguard Small Cap Value Index Inv (VISVX) and put everything into Nationwide S&P 500 Index Svc (81% of U.S. stock market) (GRMSX); and

3) in a taxable brokerage account at Vanguard buy Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%.
Pardon my ignorance, but why these 3 funds? They are all considered Large Blend. Or I shouldn't worry about that?
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ruralavalon
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Location: Illinois

Re: Investment option aside from 401k.

Post by ruralavalon »

StevenNJ1 wrote: Wed Apr 17, 2019 3:55 pm

If the goal is a "more or less stock market diverse portfolio", then:

1) in the old 401k sell T. Rowe Price New Horizons (PRNHX) and put everything into iShares Total US Stock Market Idx Inv A (BASMX);

2) in the new 401k sell Vanguard Small Cap Value Index Inv (VISVX) and put everything into Nationwide S&P 500 Index Svc (81% of U.S. stock market) (GRMSX); and

3) in a taxable brokerage account at Vanguard buy Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%.
Pardon my ignorance, but why these 3 funds? They are all considered Large Blend. Or I shouldn't worry about that?
Both iShares Total US Stock Market Idx Inv A (BASMX) and Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04% are total market funds, including stocks of large-cap, mid-cap and small-cap companies, and including both value and growth stocks. You can look these funds up on Morningstar using the ticker symbols, check the "portfolio" tab for each fund and you will see the Morningstar style box showing that these funds both cover all segments of the domestic stock market.

Nationwide S&P 500 Index Svc (GRMSX) is almost a total market fund. It invests in both growth and value stocks. A S&P 500 index fund covers 81% of the U.S. stock market, investing in stocks of selected large-cap and mid-cap U.S. companies. You can look this fund up on Morningstar using the ticker symbol, check the "portfolio" tab for the fund and you will see the Morningstar style box showing that this fund covers all segments of except small companies. In the 27 years since the creation of the first total stock market index fund the performance of the two types of funds has been almost identical. Morningstar, "growth of $10k" graph, VTSAX vs VFIAX. So it seems that omission of small-cap stocks has had little Impact on total return.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Dottie57
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Re: Investment option aside from 401k.

Post by Dottie57 »

StevenNJ1 wrote: Wed Apr 17, 2019 3:55 pm

If the goal is a "more or less stock market diverse portfolio", then:

1) in the old 401k sell T. Rowe Price New Horizons (PRNHX) and put everything into iShares Total US Stock Market Idx Inv A (BASMX);

2) in the new 401k sell Vanguard Small Cap Value Index Inv (VISVX) and put everything into Nationwide S&P 500 Index Svc (81% of U.S. stock market) (GRMSX); and

3) in a taxable brokerage account at Vanguard buy Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%.
Pardon my ignorance, but why these 3 funds? They are all considered Large Blend. Or I shouldn't worry about that?
1) total u.s. stock incorporates all U.S. stocks and therefore is a very diversified domestic fund.

2) S&P 500 is very good for large cap U.S.. stocks. I have similar and also have small cap and mid cap funds to emulate total u.s. stock fund.

3) total U.S. stock s tax efficient


I would also have some percentage in bonds. Maybe some Internationalstock funds.

I also generally skip value and growth funds and buy everything in a given cap( laerge, mid, small cap).
Topic Author
StevenNJ1
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Re: Investment option aside from 401k.

Post by StevenNJ1 »

ruralavalon wrote: Wed Apr 17, 2019 4:20 pm
StevenNJ1 wrote: Wed Apr 17, 2019 3:55 pm

If the goal is a "more or less stock market diverse portfolio", then:

1) in the old 401k sell T. Rowe Price New Horizons (PRNHX) and put everything into iShares Total US Stock Market Idx Inv A (BASMX);

2) in the new 401k sell Vanguard Small Cap Value Index Inv (VISVX) and put everything into Nationwide S&P 500 Index Svc (81% of U.S. stock market) (GRMSX); and

3) in a taxable brokerage account at Vanguard buy Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%.
Pardon my ignorance, but why these 3 funds? They are all considered Large Blend. Or I shouldn't worry about that?
Both iShares Total US Stock Market Idx Inv A (BASMX) and Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04% are total market funds, including stocks of large-cap, mid-cap and small-cap companies, and including both value and growth stocks. You can look these funds up on Morningstar using the ticker symbols, check the "portfolio" tab for each fund and you will see the Morningstar style box showing that these funds both cover all segments of the domestic stock market.

Nationwide S&P 500 Index Svc (GRMSX) is almost a total market fund. It invests in both growth and value stocks. A S&P 500 index fund covers 81% of the U.S. stock market, investing in stocks of selected large-cap and mid-cap U.S. companies. You can look this fund up on Morningstar using the ticker symbol, check the "portfolio" tab for the fund and you will see the Morningstar style box showing that this fund covers all segments of except small companies. In the 27 years since the creation of the first total stock market index fund the performance of the two types of funds has been almost identical. Morningstar, "growth of $10k" graph, VTSAX vs VFIAX. So it seems that omission of small-cap stocks has had little Impact on total return.
Dottie57 wrote: Wed Apr 17, 2019 4:30 pm
StevenNJ1 wrote: Wed Apr 17, 2019 3:55 pm

If the goal is a "more or less stock market diverse portfolio", then:

1) in the old 401k sell T. Rowe Price New Horizons (PRNHX) and put everything into iShares Total US Stock Market Idx Inv A (BASMX);

2) in the new 401k sell Vanguard Small Cap Value Index Inv (VISVX) and put everything into Nationwide S&P 500 Index Svc (81% of U.S. stock market) (GRMSX); and

3) in a taxable brokerage account at Vanguard buy Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%.
Pardon my ignorance, but why these 3 funds? They are all considered Large Blend. Or I shouldn't worry about that?
1) total u.s. stock incorporates all U.S. stocks and therefore is a very diversified domestic fund.

2) S&P 500 is very good for large cap U.S.. stocks. I have similar and also have small cap and mid cap funds to emulate total u.s. stock fund.

3) total U.S. stock s tax efficient


I would also have some percentage in bonds. Maybe some Internationalstock funds.

I also generally skip value and growth funds and buy everything in a given cap( laerge, mid, small cap).
Thank you!

3 questions
1) The GRMSX in my 401k has expense fee of 0.57% while VISVX is the cheapest option at 0.19%
2) As I am really leaning towards opening up a Roth IRA with an understanding that I can always take out the money I put in and whatever is accumulated in the account is tax free once I begin to withdraw after 60yr of age, I am liking SWPPX over VTSAX. Are these pretty much the same, in terms of investments?
3) I want to have 1 more fund where I can park money that I am not investing currently into real estate or anything else. Something NON retirement related. Would a standard SWPPX or VTSAX make the most sense? I would be contributing to it every month or so, so have to watch out for the fees of buying.
lakpr
Posts: 7139
Joined: Fri Mar 18, 2011 9:59 am

Re: Investment option aside from 401k.

Post by lakpr »

Not so fast, my friend! We New Jerseyans have been cursed with state tax law that deems Roth withdrawals as proportional to the basis and earnings if done before age 59.5. Different from Federal tax treatment. You will find yourself paying 6% on a major portion of your Roth withdrawals, and unless you want to carry these records for decades together on your NJ tax forms, I would dissuade you from even thinking about withdrawing from Roth accounts while a resident of NJ, before age 59.5.

After age 59.5, no issues with withdrawals from Roth accounts.
User avatar
ruralavalon
Posts: 20583
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Investment option aside from 401k.

Post by ruralavalon »

StevenNJ1 wrote: Thu Apr 18, 2019 8:09 am
ruralavalon wrote: Wed Apr 17, 2019 4:20 pm
StevenNJ1 wrote: Wed Apr 17, 2019 3:55 pm

If the goal is a "more or less stock market diverse portfolio", then:

1) in the old 401k sell T. Rowe Price New Horizons (PRNHX) and put everything into iShares Total US Stock Market Idx Inv A (BASMX);

2) in the new 401k sell Vanguard Small Cap Value Index Inv (VISVX) and put everything into Nationwide S&P 500 Index Svc (81% of U.S. stock market) (GRMSX); and

3) in a taxable brokerage account at Vanguard buy Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%.
Pardon my ignorance, but why these 3 funds? They are all considered Large Blend. Or I shouldn't worry about that?
Both iShares Total US Stock Market Idx Inv A (BASMX) and Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04% are total market funds, including stocks of large-cap, mid-cap and small-cap companies, and including both value and growth stocks. You can look these funds up on Morningstar using the ticker symbols, check the "portfolio" tab for each fund and you will see the Morningstar style box showing that these funds both cover all segments of the domestic stock market.

Nationwide S&P 500 Index Svc (GRMSX) is almost a total market fund. It invests in both growth and value stocks. A S&P 500 index fund covers 81% of the U.S. stock market, investing in stocks of selected large-cap and mid-cap U.S. companies. You can look this fund up on Morningstar using the ticker symbol, check the "portfolio" tab for the fund and you will see the Morningstar style box showing that this fund covers all segments of except small companies. In the 27 years since the creation of the first total stock market index fund the performance of the two types of funds has been almost identical. Morningstar, "growth of $10k" graph, VTSAX vs VFIAX. So it seems that omission of small-cap stocks has had little Impact on total return.
Dottie57 wrote: Wed Apr 17, 2019 4:30 pm
StevenNJ1 wrote: Wed Apr 17, 2019 3:55 pm

If the goal is a "more or less stock market diverse portfolio", then:

1) in the old 401k sell T. Rowe Price New Horizons (PRNHX) and put everything into iShares Total US Stock Market Idx Inv A (BASMX);

2) in the new 401k sell Vanguard Small Cap Value Index Inv (VISVX) and put everything into Nationwide S&P 500 Index Svc (81% of U.S. stock market) (GRMSX); and

3) in a taxable brokerage account at Vanguard buy Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%.
Pardon my ignorance, but why these 3 funds? They are all considered Large Blend. Or I shouldn't worry about that?
1) total u.s. stock incorporates all U.S. stocks and therefore is a very diversified domestic fund.

2) S&P 500 is very good for large cap U.S.. stocks. I have similar and also have small cap and mid cap funds to emulate total u.s. stock fund.

3) total U.S. stock s tax efficient


I would also have some percentage in bonds. Maybe some Internationalstock funds.

I also generally skip value and growth funds and buy everything in a given cap( laerge, mid, small cap).
Thank you!

3 questions
1) The GRMSX in my 401k has expense fee of 0.57% while VISVX is the cheapest option at 0.19%
2) As I am really leaning towards opening up a Roth IRA with an understanding that I can always take out the money I put in and whatever is accumulated in the account is tax free once I begin to withdraw after 60yr of age, I am liking SWPPX over VTSAX. Are these pretty much the same, in terms of investments?
3) I want to have 1 more fund where I can park money that I am not investing currently into real estate or anything else. Something NON retirement related. Would a standard SWPPX or VTSAX make the most sense? I would be contributing to it every month or so, so have to watch out for the fees of buying.
Please get out of the habit of using ticker symbols alone, without the fund names. Most people don't memorize ticker symbols of funds they don't use themselves. Using tickers without fund names means that anyone who wants to help you is forced to look up what you are referring to.

You wanted "a more or less stock market diverse portfolio".

1) In a 401k the fund choices are limited, and you have to make compromises. In selecting funds strive for a combination of broad diversification (to reduce risk) and low expense ratios (to increase your net gain). An expense ratio of 0.57% is high for a S&P 500 index fund, but not too high to use. Nationwide S&P 500 Index Svc (81% of U.S. stock market) (GRMSX) is very similar to a total stock market index fund, and is much more diversified than Vanguard Small Cap Value Index Inv (VISVX).

3) For domestic stocks I suggest using a total stock market index fund where available. The two funds are very similar, but Schwab® S&P 500 Index Fund (SWPPX) is not as dversified as Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX). Are you thinking of using a taxable brokerage account at Schwab? If using an taxable account at Schwab, consider using Schwab Total Stock Market Index Fund (SWTSX).
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Dottie57
Posts: 9744
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

Re: Investment option aside from 401k.

Post by Dottie57 »

ruralavalon wrote: Thu Apr 18, 2019 9:27 am
StevenNJ1 wrote: Thu Apr 18, 2019 8:09 am
ruralavalon wrote: Wed Apr 17, 2019 4:20 pm
StevenNJ1 wrote: Wed Apr 17, 2019 3:55 pm

If the goal is a "more or less stock market diverse portfolio", then:

1) in the old 401k sell T. Rowe Price New Horizons (PRNHX) and put everything into iShares Total US Stock Market Idx Inv A (BASMX);

2) in the new 401k sell Vanguard Small Cap Value Index Inv (VISVX) and put everything into Nationwide S&P 500 Index Svc (81% of U.S. stock market) (GRMSX); and

3) in a taxable brokerage account at Vanguard buy Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%.
Pardon my ignorance, but why these 3 funds? They are all considered Large Blend. Or I shouldn't worry about that?
Both iShares Total US Stock Market Idx Inv A (BASMX) and Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04% are total market funds, including stocks of large-cap, mid-cap and small-cap companies, and including both value and growth stocks. You can look these funds up on Morningstar using the ticker symbols, check the "portfolio" tab for each fund and you will see the Morningstar style box showing that these funds both cover all segments of the domestic stock market.

Nationwide S&P 500 Index Svc (GRMSX) is almost a total market fund. It invests in both growth and value stocks. A S&P 500 index fund covers 81% of the U.S. stock market, investing in stocks of selected large-cap and mid-cap U.S. companies. You can look this fund up on Morningstar using the ticker symbol, check the "portfolio" tab for the fund and you will see the Morningstar style box showing that this fund covers all segments of except small companies. In the 27 years since the creation of the first total stock market index fund the performance of the two types of funds has been almost identical. Morningstar, "growth of $10k" graph, VTSAX vs VFIAX. So it seems that omission of small-cap stocks has had little Impact on total return.
Dottie57 wrote: Wed Apr 17, 2019 4:30 pm
StevenNJ1 wrote: Wed Apr 17, 2019 3:55 pm

If the goal is a "more or less stock market diverse portfolio", then:

1) in the old 401k sell T. Rowe Price New Horizons (PRNHX) and put everything into iShares Total US Stock Market Idx Inv A (BASMX);

2) in the new 401k sell Vanguard Small Cap Value Index Inv (VISVX) and put everything into Nationwide S&P 500 Index Svc (81% of U.S. stock market) (GRMSX); and

3) in a taxable brokerage account at Vanguard buy Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%.
Pardon my ignorance, but why these 3 funds? They are all considered Large Blend. Or I shouldn't worry about that?
1) total u.s. stock incorporates all U.S. stocks and therefore is a very diversified domestic fund.

2) S&P 500 is very good for large cap U.S.. stocks. I have similar and also have small cap and mid cap funds to emulate total u.s. stock fund.

3) total U.S. stock s tax efficient


I would also have some percentage in bonds. Maybe some Internationalstock funds.

I also generally skip value and growth funds and buy everything in a given cap( laerge, mid, small cap).
Thank you!

3 questions
1) The GRMSX in my 401k has expense fee of 0.57% while VISVX is the cheapest option at 0.19%
2) As I am really leaning towards opening up a Roth IRA with an understanding that I can always take out the money I put in and whatever is accumulated in the account is tax free once I begin to withdraw after 60yr of age, I am liking SWPPX over VTSAX. Are these pretty much the same, in terms of investments?
3) I want to have 1 more fund where I can park money that I am not investing currently into real estate or anything else. Something NON retirement related. Would a standard SWPPX or VTSAX make the most sense? I would be contributing to it every month or so, so have to watch out for the fees of buying.
Please get out of the habit of using ticker symbols alone, without the fund names. Most people don't memorize ticker symbols of funds they don't use themselves. Using tickers without fund names means that anyone who wants to help you is forced to look up what you are referring to.

You wanted "a more or less stock market diverse portfolio".

1) In a 401k the fund choices are limited, and you have to make compromises. In selecting funds strive for a combination of broad diversification (to reduce risk) and low expense ratios (to increase your net gain). An expense ratio of 0.57% is high for a S&P 500 index fund, but not too high to use. Nationwide S&P 500 Index Svc (81% of U.S. stock market) (GRMSX) is very similar to a total stock market index fund, and is much more diversified than Vanguard Small Cap Value Index Inv (VISVX).

3) For domestic stocks I suggest using a total stock market index fund where available. The two funds are very similar, but Schwab® S&P 500 Index Fund (SWPPX) is not as dversified as Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX). Are you thinking of using a taxable brokerage account at Schwab? If using an taxable account at Schwab, consider using Schwab Total Stock Market Index Fund (SWTSX).
Great advice.
Topic Author
StevenNJ1
Posts: 270
Joined: Fri Apr 04, 2014 12:56 pm

Re: Investment option aside from 401k.

Post by StevenNJ1 »

lakpr wrote: Thu Apr 18, 2019 9:06 am Not so fast, my friend! We New Jerseyans have been cursed with state tax law that deems Roth withdrawals as proportional to the basis and earnings if done before age 59.5. Different from Federal tax treatment. You will find yourself paying 6% on a major portion of your Roth withdrawals, and unless you want to carry these records for decades together on your NJ tax forms, I would dissuade you from even thinking about withdrawing from Roth accounts while a resident of NJ, before age 59.5.

After age 59.5, no issues with withdrawals from Roth accounts.
Thank you for this valuable input. I assume there will be no tax benefit when putting money away to Roth IRA, correct? Meaning, contributing to Roth IRA won't increase my Tax refund next year or years after that.
lakpr
Posts: 7139
Joined: Fri Mar 18, 2011 9:59 am

Re: Investment option aside from 401k.

Post by lakpr »

Correct. Only the growth is tax free, IF carried until age 59.5
Topic Author
StevenNJ1
Posts: 270
Joined: Fri Apr 04, 2014 12:56 pm

Re: Investment option aside from 401k.

Post by StevenNJ1 »

ruralavalon wrote: Wed Apr 17, 2019 11:46 am
StevenNJ1 wrote: Tue Apr 16, 2019 4:47 pm This may not be the most scientific approach, but please bare with me. Looking to invest in more or less safe option instead of money sitting collecting just 2.25% in savings account.

In my late 30s. No debt other than mortgage at 3.75%.

Currently have my 2 401k plans invested in;
PRNHX - Mid-Cap Growth - Unable to contribute more
BASMX - Large Blend - Unable to contribute more
GRMSX - Large Blend
VISVX - Small Value

Now, I am looking to invest a bit into taxable account such as VHDYX - Large Value. More or less safe, low expense, dividends? Considered diverse enough compared to my other investments>?

thank you.

StevenNJ1 wrote: Wed Apr 17, 2019 8:11 am . . . . .
I have enough saved up as emergency cash. Now I have 50k+ and earning more to invest somewhere. My options are either placing money into savings account tat gives me 2.3% return, pay off mortgage faster but there my rate is 3.75%, considering inflation, may not be the best idea to pay it off fast. I already max out my 401k. Not able to do Trad IRA due to my high salary. Don't want to do Roth IRA either for now. Simply looking to place the extra cash into something more or less safe where I can always take it out if need be. I am in late 30s, don't mind waiting 10yr to recover if stock market takes a hit.
. . . . .
Why do you not want a Roth IRA?

In a taxable brokerage account at a low cost provider like Vanguard you could use very tax-efficient stock index funds. Examples include:
1) Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04% ; and
2) Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%.

No stock fund is safe.

For safety you could use a good bond fund. But for good tax-effiency the place to hold a bond fund is in your 401k, if a decent bond fund is offered there. What are the other funds offered in your current 401k plan? Please give fund names, tickers and expense ratios.

Or you could consider I-bonds from Treasury Direct. "I Bonds cannot be redeemed during the first year, and if you redeem them within the first five years after purchase, you lose the most recent three months' interest. When you redeem your I Bonds, you can never get back less than you invested, even if there was a long period of negative inflation (deflation)." Boglehead's wiki, "I Savings Bonds".
I finally am ready to move forward with your and other suggestions received here.

Old 401k = iShares Total US Stock Market Idx Inv A (BASMX)
New 401k = Nationwide S&P 500 Index Svc (GRMSX)
Roth IRA = Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)

I also want to include some individual stocks such as Microsoft and other long term growth stocks in the Roth IRA.
Considering my situation, this will need to be a Backdoor IRA and here is where I am getting confusing info.

Just got off the phone after speaking with Schwab and Vanguard. Both tell me that even though I am sending money from my bank account first into Traditional IRA and once those clear doing the backdoor into Roth IRA, I may still get hit with double tax. How is that possible? I am single, over 100k income.

Please clear this up for me and I am ready to proceed.
thank you.
User avatar
ruralavalon
Posts: 20583
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Investment option aside from 401k.

Post by ruralavalon »

StevenNJ1 wrote: Wed May 22, 2019 1:44 pm
ruralavalon wrote: Wed Apr 17, 2019 11:46 am
StevenNJ1 wrote: Tue Apr 16, 2019 4:47 pm This may not be the most scientific approach, but please bare with me. Looking to invest in more or less safe option instead of money sitting collecting just 2.25% in savings account.

In my late 30s. No debt other than mortgage at 3.75%.

Currently have my 2 401k plans invested in;
PRNHX - Mid-Cap Growth - Unable to contribute more
BASMX - Large Blend - Unable to contribute more
GRMSX - Large Blend
VISVX - Small Value

Now, I am looking to invest a bit into taxable account such as VHDYX - Large Value. More or less safe, low expense, dividends? Considered diverse enough compared to my other investments>?

thank you.

StevenNJ1 wrote: Wed Apr 17, 2019 8:11 am . . . . .
I have enough saved up as emergency cash. Now I have 50k+ and earning more to invest somewhere. My options are either placing money into savings account tat gives me 2.3% return, pay off mortgage faster but there my rate is 3.75%, considering inflation, may not be the best idea to pay it off fast. I already max out my 401k. Not able to do Trad IRA due to my high salary. Don't want to do Roth IRA either for now. Simply looking to place the extra cash into something more or less safe where I can always take it out if need be. I am in late 30s, don't mind waiting 10yr to recover if stock market takes a hit.
. . . . .
Why do you not want a Roth IRA?

In a taxable brokerage account at a low cost provider like Vanguard you could use very tax-efficient stock index funds. Examples include:
1) Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04% ; and
2) Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%.

No stock fund is safe.

For safety you could use a good bond fund. But for good tax-effiency the place to hold a bond fund is in your 401k, if a decent bond fund is offered there. What are the other funds offered in your current 401k plan? Please give fund names, tickers and expense ratios.

Or you could consider I-bonds from Treasury Direct. "I Bonds cannot be redeemed during the first year, and if you redeem them within the first five years after purchase, you lose the most recent three months' interest. When you redeem your I Bonds, you can never get back less than you invested, even if there was a long period of negative inflation (deflation)." Boglehead's wiki, "I Savings Bonds".
I finally am ready to move forward with your and other suggestions received here.

Old 401k = iShares Total US Stock Market Idx Inv A (BASMX)
New 401k = Nationwide S&P 500 Index Svc (GRMSX)
Roth IRA = Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)

I also want to include some individual stocks such as Microsoft and other long term growth stocks in the Roth IRA.
Considering my situation, this will need to be a Backdoor IRA and here is where I am getting confusing info.

Just got off the phone after speaking with Schwab and Vanguard. Both tell me that even though I am sending money from my bank account first into Traditional IRA and once those clear doing the backdoor into Roth IRA, I may still get hit with double tax. How is that possible? I am single, over 100k income.

Please clear this up for me and I am ready to proceed.
thank you.
I don't know why they say that about double tax.

Will you be using some I-bonds to add some safety to your portfolio?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Topic Author
StevenNJ1
Posts: 270
Joined: Fri Apr 04, 2014 12:56 pm

Re: Investment option aside from 401k.

Post by StevenNJ1 »

ruralavalon wrote: Wed May 22, 2019 2:07 pm
StevenNJ1 wrote: Wed May 22, 2019 1:44 pm
ruralavalon wrote: Wed Apr 17, 2019 11:46 am
StevenNJ1 wrote: Tue Apr 16, 2019 4:47 pm This may not be the most scientific approach, but please bare with me. Looking to invest in more or less safe option instead of money sitting collecting just 2.25% in savings account.

In my late 30s. No debt other than mortgage at 3.75%.

Currently have my 2 401k plans invested in;
PRNHX - Mid-Cap Growth - Unable to contribute more
BASMX - Large Blend - Unable to contribute more
GRMSX - Large Blend
VISVX - Small Value

Now, I am looking to invest a bit into taxable account such as VHDYX - Large Value. More or less safe, low expense, dividends? Considered diverse enough compared to my other investments>?

thank you.

StevenNJ1 wrote: Wed Apr 17, 2019 8:11 am . . . . .
I have enough saved up as emergency cash. Now I have 50k+ and earning more to invest somewhere. My options are either placing money into savings account tat gives me 2.3% return, pay off mortgage faster but there my rate is 3.75%, considering inflation, may not be the best idea to pay it off fast. I already max out my 401k. Not able to do Trad IRA due to my high salary. Don't want to do Roth IRA either for now. Simply looking to place the extra cash into something more or less safe where I can always take it out if need be. I am in late 30s, don't mind waiting 10yr to recover if stock market takes a hit.
. . . . .
Why do you not want a Roth IRA?

In a taxable brokerage account at a low cost provider like Vanguard you could use very tax-efficient stock index funds. Examples include:
1) Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04% ; and
2) Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%.

No stock fund is safe.

For safety you could use a good bond fund. But for good tax-effiency the place to hold a bond fund is in your 401k, if a decent bond fund is offered there. What are the other funds offered in your current 401k plan? Please give fund names, tickers and expense ratios.

Or you could consider I-bonds from Treasury Direct. "I Bonds cannot be redeemed during the first year, and if you redeem them within the first five years after purchase, you lose the most recent three months' interest. When you redeem your I Bonds, you can never get back less than you invested, even if there was a long period of negative inflation (deflation)." Boglehead's wiki, "I Savings Bonds".
I finally am ready to move forward with your and other suggestions received here.

Old 401k = iShares Total US Stock Market Idx Inv A (BASMX)
New 401k = Nationwide S&P 500 Index Svc (GRMSX)
Roth IRA = Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)

I also want to include some individual stocks such as Microsoft and other long term growth stocks in the Roth IRA.
Considering my situation, this will need to be a Backdoor IRA and here is where I am getting confusing info.

Just got off the phone after speaking with Schwab and Vanguard. Both tell me that even though I am sending money from my bank account first into Traditional IRA and once those clear doing the backdoor into Roth IRA, I may still get hit with double tax. How is that possible? I am single, over 100k income.

Please clear this up for me and I am ready to proceed.
thank you.
I don't know why they say that about double tax.

Will you be using some I-bonds to add some safety to your portfolio?
I have no idea what i-bonds are. Will read up on it.
User avatar
ruralavalon
Posts: 20583
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Investment option aside from 401k.

Post by ruralavalon »

StevenNJ1 wrote: Wed May 22, 2019 2:14 pm
ruralavalon wrote: Wed May 22, 2019 2:07 pm
StevenNJ1 wrote: Wed May 22, 2019 1:44 pm
ruralavalon wrote: Wed Apr 17, 2019 11:46 am
StevenNJ1 wrote: Tue Apr 16, 2019 4:47 pm This may not be the most scientific approach, but please bare with me. Looking to invest in more or less safe option instead of money sitting collecting just 2.25% in savings account.

In my late 30s. No debt other than mortgage at 3.75%.

Currently have my 2 401k plans invested in;
PRNHX - Mid-Cap Growth - Unable to contribute more
BASMX - Large Blend - Unable to contribute more
GRMSX - Large Blend
VISVX - Small Value

Now, I am looking to invest a bit into taxable account such as VHDYX - Large Value. More or less safe, low expense, dividends? Considered diverse enough compared to my other investments>?

thank you.

StevenNJ1 wrote: Wed Apr 17, 2019 8:11 am . . . . .
I have enough saved up as emergency cash. Now I have 50k+ and earning more to invest somewhere. My options are either placing money into savings account tat gives me 2.3% return, pay off mortgage faster but there my rate is 3.75%, considering inflation, may not be the best idea to pay it off fast. I already max out my 401k. Not able to do Trad IRA due to my high salary. Don't want to do Roth IRA either for now. Simply looking to place the extra cash into something more or less safe where I can always take it out if need be. I am in late 30s, don't mind waiting 10yr to recover if stock market takes a hit.
. . . . .
Why do you not want a Roth IRA?

In a taxable brokerage account at a low cost provider like Vanguard you could use very tax-efficient stock index funds. Examples include:
1) Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04% ; and
2) Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%.

No stock fund is safe.

For safety you could use a good bond fund. But for good tax-effiency the place to hold a bond fund is in your 401k, if a decent bond fund is offered there. What are the other funds offered in your current 401k plan? Please give fund names, tickers and expense ratios.

Or you could consider I-bonds from Treasury Direct. "I Bonds cannot be redeemed during the first year, and if you redeem them within the first five years after purchase, you lose the most recent three months' interest. When you redeem your I Bonds, you can never get back less than you invested, even if there was a long period of negative inflation (deflation)." Boglehead's wiki, "I Savings Bonds".
I finally am ready to move forward with your and other suggestions received here.

Old 401k = iShares Total US Stock Market Idx Inv A (BASMX)
New 401k = Nationwide S&P 500 Index Svc (GRMSX)
Roth IRA = Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)

I also want to include some individual stocks such as Microsoft and other long term growth stocks in the Roth IRA.
Considering my situation, this will need to be a Backdoor IRA and here is where I am getting confusing info.

Just got off the phone after speaking with Schwab and Vanguard. Both tell me that even though I am sending money from my bank account first into Traditional IRA and once those clear doing the backdoor into Roth IRA, I may still get hit with double tax. How is that possible? I am single, over 100k income.

Please clear this up for me and I am ready to proceed.
thank you.
I don't know why they say that about double tax.

Will you be using some I-bonds to add some safety to your portfolio?
I have no idea what i-bonds are. Will read up on it.
Wiki article, "I savings bonds".

"Series I Savings Bonds (often called I Bonds) are government savings bonds issued by the U.S. Treasury that offer inflation protection. I Bonds offer tax-deferral for up to 30 years and are free from state and local taxation. I Bonds are not marketable securities and cannot be traded in the secondary market."
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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