Late In Life Investor - 17 Years Until I Turn 60: Better To Put Money In Taxable Brokerage Or Roth IRA

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makeminemichael
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Late In Life Investor - 17 Years Until I Turn 60: Better To Put Money In Taxable Brokerage Or Roth IRA

Post by makeminemichael »

Hi all. I'm a late in life investor here and I'm wondering what's the best course of action with having my money work for me. While I hit retirement age in 17 years, I doubt I can actually retire from work at 60. But currently my work is spotty and it is possible I could be jobless for a spell meaning I wouldn't be able to contribute to my Roth IRA. Also if I need some cash, I'm wondering if for me my better bet is to plug in my money into a taxable brokerage and getting dividends.

I only have $2k in my taxable brokerage. $12k in my roth ira. And $1k in my savings. Late in life and low in invested funds and liquidity. So I'm thinking what's my best course of action.

What do you all think? Is fronting my taxable brokerage my beset bet?
theorist
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Re: Late In Life Investor - 17 Years Until I Turn 60: Better To Put Money In Taxable Brokerage Or Roth IRA

Post by theorist »

makeminemichael wrote: Sun May 15, 2022 5:22 pm Hi all. I'm a late in life investor here and I'm wondering what's the best course of action with having my money work for me. While I hit retirement age in 17 years, I doubt I can actually retire from work at 60. But currently my work is spotty and it is possible I could be jobless for a spell meaning I wouldn't be able to contribute to my Roth IRA. Also if I need some cash, I'm wondering if for me my better bet is to plug in my money into a taxable brokerage and getting dividends.

I only have $2k in my taxable brokerage. $12k in my roth ira. And $1k in my savings. Late in life and low in invested funds and liquidity. So I'm thinking what's my best course of action.

What do you all think? Is fronting my taxable brokerage my beset bet?
43 is not so late! (I’m guessing that is your age from your mention of 60 in your post, I don’t know what “retirement age” is.)

I would not invest for dividends in a taxable account. Dividends cause tax drag; if you are a big dividend enthusiast, invest in dividend funds in a tax protected account. (Note that there are good arguments that dividends are no different than involuntarily having some of your shares sold at times you don’t control, but that is something you can read about by searching for threads about dividend investing.)

I’d recommend tax efficient, low expense ratio index funds for your taxable account. Something like total US market makes sense there.

Good luck!
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telemark
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Re: Late In Life Investor - 17 Years Until I Turn 60: Better To Put Money In Taxable Brokerage Or Roth IRA

Post by telemark »

I would contribute to the Roth IRA first. It gives you more flexibility in choosing investments, and you can withdraw your contributions -- the basis -- at any time, so liquidity should not be a concern there.
woodside
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Re: Late In Life Investor - 17 Years Until I Turn 60: Better To Put Money In Taxable Brokerage Or Roth IRA

Post by woodside »

When I started investing, I always put the money first in Roth. This was for my emergency fund. Since it was used as an emergency fund, the asset allocation was very conservative.

Later on, after I had more money and reached the maximum contribution of ROTH, the ROTH asset allocation is adjusted to be more aggressive, I then started to put money in taxable brokerage for the home downpayment and emergency money (so very conservative asset allocation).

The contribution of the ROTH can be taken out any time you want.
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GerryL
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Re: Late In Life Investor - 17 Years Until I Turn 60: Better To Put Money In Taxable Brokerage Or Roth IRA

Post by GerryL »

I didn't even start seriously investing until I was in my early 40s. I was just coming off an extended period of unemployment, and my savings were only a bit higher than what you listed. (And I had a young 10% mortgage.) Roths were not yet available, but as soon as that option opened up, I grabbed it. By the time I was 45, I was fortunate to be able to max out a 401k and, eventually, max out a Roth IRA. I also auto-invested a small, set amount in a taxable account, where I also stashed excess cash throughout the year.

I never considered retiring at 60, but my case shows that it is possible to catch up after a late start. You might not be able to max out all of your options, but if you look at the long-term and are disciplined in your savings, it is possible to achieve retirement/financial independence -- maybe later rather than sooner.

PS I never considered my retirement savings as a possible emergency fund.
bltn
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Re: Late In Life Investor - 17 Years Until I Turn 60: Better To Put Money In Taxable Brokerage Or Roth IRA

Post by bltn »

Although always a big saver, a side business I took on in my 30 s almost drove my net worth to zero as I approached 40. I was able to sell the business assets for just enough to pay off the loans and had to restart my savings from almost nothing. In just a few years, I decided that indexing would work as well for me as buying individual stocks with less risk. Then I worked, saved and stuck to my indexing plan. That worked out well.

I wish I had put more money into my Roth, and been able to start it earlier. One day your Roth savings will be your most valuable savings dollars. Tax free savings will allow you more options in retirement. Second best retirement savings are those in taxable accounts. And less useful than the other two are savings in tax deferred accounts. But the numbers in the tax deferred accounts may be deceptively large.
Doctor Rhythm
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Re: Late In Life Investor - 17 Years Until I Turn 60: Better To Put Money In Taxable Brokerage Or Roth IRA

Post by Doctor Rhythm »

+1 to maxing out your Roth before investing in a taxable account. One additional reason beyond what was already stated is that it’s a relatively safe place to make and fix mistakes.
suemarkp
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Re: Late In Life Investor - 17 Years Until I Turn 60: Better To Put Money In Taxable Brokerage Or Roth IRA

Post by suemarkp »

You missed a category and that is traditional IRA. The traditional versus roth choice is based on income and tax rates. You did not mention your income and tax bracket (that can be guessed if you say married versus single). If your income is high when you work, the tIRA may be better. If it is low, it could still be better because of the Savers Tax Credit.

For both tIRA and Roth IRA, you can only put $6k in those (combined) per year. After one of those, do taxable unless you have some tax deferred space like a 401k.

You have a long road to go. The key is to save as much as you can now instead of where you save as you will need to save more than $6k per year.
Mark | Somewhere in WA State
YeahBuddy
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Re: Late In Life Investor - 17 Years Until I Turn 60: Better To Put Money In Taxable Brokerage Or Roth IRA

Post by YeahBuddy »

Investing doesn't end at age 60. Relax. Build a good emergency fund first. Something to fall back on if needed. Then start the Roth IRA (which can also act as part of your EF). Or just start it now with a small monthly contribution while building your EF. Can you get a second stream of income? Also, 40s is not late in life.
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jharkin
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Re: Late In Life Investor - 17 Years Until I Turn 60: Better To Put Money In Taxable Brokerage Or Roth IRA

Post by jharkin »

You are starting to save later than some - but I want you to remember that something like half of all Americans never start at all. So you still have a lot of time to prepare for a nice, comfortable retirement.

The FIRST thing you should do is read https://www.bogleheads.org/wiki/Priorit ... nvestments
- I would prioritizing building up an emergency fund first, and it should be highly liquid and "invested" in safe vehicles. High yield savings, CDs, money market.
- Once you have 6months covered then you can start thinking about Roth IRA. And depending on your employment status, when and if you have acess to things like 401k, use it.

No matter what happens going forward, as long as you have worked at least 10 years (40 quarters) of you life so far in some form you will have social security and medicare no matter what. You will probably want to work to at least 65 or later and delay taking SS as late as you can (67, or even 70). Add 20 years of saving in Roths/IRAs/etc and I bet you will end up pretty good!

-good luck.
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telemark
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Re: Late In Life Investor - 17 Years Until I Turn 60: Better To Put Money In Taxable Brokerage Or Roth IRA

Post by telemark »

jharkin wrote: Mon May 16, 2022 7:22 am - I would prioritizing building up an emergency fund first, and it should be highly liquid and "invested" in safe vehicles. High yield savings, CDs, money market.
Or high yield savings or CDs inside a Roth IRA, as most banks allow. The interest is tax free, and when your financial situation improves you have more Roth space to invest in.
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ruralavalon
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Re: Late In Life Investor - 17 Years Until I Turn 60: Better To Put Money In Taxable Brokerage Or Roth IRA

Post by ruralavalon »

Age 43 is not too late to make a difference using a reasonable investing plan and a good savings rate. I always had very erratic income. I did not get serious about retirement savings until my late 30s, and it has turned out well for us. I retired at age 66.

. . . . .

Some additional information might be useful.

What is your tax bracket, both federal and state? What is your tax filing status?

About how much (in dollars) do you believe that you might be able to contribute annually to investing?

Do you have any debt? If so what types, amounts and interest rates?

Is there a plan offered at work like a 401k, 403b, 457b, SEP IRA, SIMPLE IRA or TSP? If so is there any employer match or employer contribution?

Why do you indicate retirement age as 60 years old? Will you have a pension at age 60? Will you also be eligible for Social Security?

Please simply add this to your original w using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.

makeminemichael wrote: Sun May 15, 2022 5:22 pm Hi all. I'm a late in life investor here and I'm wondering what's the best course of action with having my money work for me. While I hit retirement age in 17 years, I doubt I can actually retire from work at 60. But currently my work is spotty and it is possible I could be jobless for a spell meaning I wouldn't be able to contribute to my Roth IRA. Also if I need some cash, I'm wondering if for me my better bet is to plug in my money into a taxable brokerage and getting dividends.

I only have $2k in my taxable brokerage. $12k in my roth ira. And $1k in my savings. Late in life and low in invested funds and liquidity. So I'm thinking what's my best course of action.

What do you all think? Is fronting my taxable brokerage my beset bet?
In my opinion, based on what you have said so far, making contributions to a Roth IRA looks like the top priority. When under age 50 the maximum annual contribution to a Roth IRA is $6k.

The most important investing decision you can make is to establish a high rate of contributions.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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