Every week during the More Than Money show on AM 750 WSB we open up the week's mailbag to answer your questions in the "Lightning Round."
Today we’re discussing:
Where to invest your money when you’ve maxed out your 401K?
What to invest in to bring the biggest returns and profit?
What to do when your company terminates their pension plan?
How we get paid for our services?
Let’s do this!
My 401K is maxed out for the year where else can I invest for the rest of the year? I think I make too much to contribute to a Roth IRA.
Do you have 3 months of expenses in an emergency fund? You sound like a good saver, so there’s a good chance you already have that. If not, pause and do that first.
If you already have that saved up, have you paid off debt?
The next step would be to open up an individual investment account. If you’ve already saved everything you can in your 401K, it’s a great next place to go.
If you have an HSA through work you can max that out or potentially contribute money to a 529 for your kids college savings.
If your company is giving you a match based on every contribution you make, if you max out early you’re missing some of that match. Make sure you change your contributions so you don’t max it out until December. That way you get the full company match all year long.
I have $10,000 I’d like to invest. What should I invest in to bring me the biggest returns and most profit? I’ll be retiring in approximately 18 years.
Do you have emergency savings? Take what you need from the $10,000 for three months of expenses to sit in a savings account. If you have debt, pay off your debt. Now we can invest!
Focus on mass diversification. Invest in the whole market! You want to invest in the whole market through low cost index funds that are investing a little bit in tons of companies. You don’t want to be stuck putting a lot of money into a few companies (like we saw with GE) and have a massive set back and lose a ton of money.
The next question is what type of account do you put it in? Since you have 18 years, I would put it into a retirement account. You get special tax treatment that will help it grow better in the meantime. A Roth IRA is probably the best fit in this situation because of its flexibility.
The grid that you need to think through for financial planning is flexibility. What if you need that money unexpectedly? If you’re under 50 you can put $5,500 into a Roth IRA. For every dollar you put in you can pull back out if you need it! The beautiful thing about a Roth IRA is it’s going to grow tax free forever and it allows for flexibility.
My company is terminating the pension plan. From what I’ve been reading, I should take the lump sum and roll it into an IRA. Do you agree? If so, I don’t have an IRA. Do I go to my bank and open one? Thank you!
It depends. If you have a pension plan that’s getting terminated the answer is often to take the lump sum because of the risk factor. You know today you can get to the lump sum, but the question is, is the company still going to be viable in paying the pension out in 20 years? We’ve seen companies have to cut pensions over time. That’s a big part of the analysis of why you might want to take the lump sum. I have met people, that when we run the numbers, the month to month pension they’d be receiving is way better than what they could get on the private market right now. If that’s the case, it might be worth taking the pension. It’s not black or white. Often the lump sum is a good idea, but not every time.
How do you get paid for your services? Do you require or charge for a minimum portfolio?
I love talking about this! We are a fee based planning firm. We only charge fees. We’re not paid commissions. Only 8% of the firms in the country are fee only fiduciary firms. When you come in, we give you exactly what it costs to work with us or set up a plan, and the percentage we charge to set up investments.
We do not charge an investment minimum. There is a fee we require to go through a planning process, but we’ve made that incredibly competitive in the industry. Anyone that wants to work with us, we find a way to make it work.
BOOM! THAT'S ALL FOR THIS WEEK.
As always, I don’t know the full situation with these questions. If you want to dive deeper into any of these questions please don’t hesitate to set up a free consultation through the link below. I would love to help you figure out the most efficient way to save and utilize your money.
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Our team answers questions every week on the air and responds to every email sent in.