I am 28 and I invest 15% to my 401k and I max my IRA already this year, what else should I do?

Question

I only make 35,000 a year, and my husband also makes about 35,000 a year, I have about 150 a month extra that I can invest somewhere, I already have a year's worth of funds saved up for emergencies, I like to keep a year's worth for my own peace of mind, I have a 200,000 mortgage left and I put an extra 100 a month to principal for the mortgage, I do not have any other debt, I would like to know where I should invest the extra 150, my husband do not have any kids yet, we would love to have kids soon, what do you recommend?

Answer 1

First, let me say that I think you're doing very well managing your finances. You're way ahead of a lot of people.

What I'd do in your situation is this:
Open a mutual fund account with a company like Vanguard, American Century, Fidelity, T. Rowe Price, etc. and invest that money in a "no-load" (i.e. no upfront fee) fund that tracks a major stock market index like the S&P 500, S&P 400 Mid-Cap, or Russell 2000. Over long periods of time, no investment class has performed better than stocks.

Since you seem to be a disciplined saver, if your mortgage is 7% or less, I personally would stop putting the $100 a month on that and invest that money in the mutual fund also. Over long periods of time stocks return considerably more than 7% so I'd be expecting to make more in gains on the mutual funds than it cost me in interest on the mortgage. (Note: I would not say the same thing to someone who would spend the extra $100 or put it in a bank account or CD since they return less than 7%.) Also, if you think you'll panic and pull the money out when the market drops, I wouldn't do that either. If you pull out during drops, you'll probably miss the inevitable rise that comes afterward and likely come out worse off than if you had just paid down the mortgage.

Feel free to e-mail me if you have questions about what I'm saying or why.

Answer 2

Wow Nina and way to go! You're doing great!
That being said, let me offer some new perspectives on getting ready for retirement.
You said that you put 15% of your pay into your 401(k) plan. What is the maximum amount that your company matches? If it IS 15%, keep putting in the 15%. If not, adjust it accordingly. For example, if your company matches 5% dollar for dollar, do that maximum.
The reason being is that a 401(k) grows tax free. When you retire, it'll be taxed. I would personally put the other percentage into a ROTH IRA, or if your company offers it a Roth 401(k).
Now the extra 150 dollars a month. Personally, I would put an extra 50 dollars a month into my home, and the other 100 dollars into an S&P 500 index fund.
When you have children, you can take that 100 dollars and put it into a college savings plan. Every state has one and I believe Utah is the favorite one.
Congrats! And good work!

Answer 3

The BEST thing would be to pay that 150 on your mortgage principal. It will save you a LOT of interest money in the long run, and your house will be paid off that much sooner.

Then, when you DO have kids, you'll need that extra 150 per month in living expenses.

Answer 4

You are doing a fantastic job to have the discipline to save at your age and I'm sure your will be way ahead of most all your peers if you can continue with the plan you are now on. I would pay the extra 150 on the mortgage to eliminate it as soon as possible. Congratulations on the position you are in now, it sounds to me you are well on your way to financial success.

Answer 5

I would recommend putting it into a high yield saving account until you are ready to contribute to a college fund, such as a 529 plan, since you are planning on kids. Or you may want to look at a high yield money market account or fund when you have saved at least an extra $1,000 or so.

Answer 6

First, enable me inform you, you're doing very well in accordance for your income/mark downs factor. that is difficult for us to inform you what to do because you probably did not include your husband interior the equation. Now that you're married, each and every thing you do economic outcomes your total loved ones income numbers. My first suggestion might want to be for both you and your husband to max out the 401k and the IRA's. Then, in case you nevertheless require something for your retirement and want tax-defferal advantages, the basically funding automobile with enhance might want to be an annuity. If it grow to be me, i might want to initiate putting 2 hundred in a mutual fund account for now after which do a economic statement with your husband and initiate determining such issues as..... once you want to retire(retirement is about seventy 5% of your total loved ones income to stay on a similar factor you at the instantaneous are) What are your objectives... there is in simple terms too many variables for us to inform you properly what to do with the money. You and your husband might want to sit and formulate a economic statement to get a more advantageous positive theory what you want to do. even although you likely "imagine" its you funds, yet now that you're married, technically its a finished loved ones element now.... sturdy success..

Answer 7

A private Roth IRA would probably be best. Your doing pretty well and at that rate will be millionaires and looking to retire perhaps a few years early.

Answer 8

just wanted to add congrats to nina and her hubby...you two are doing MARVELOUS!!!!

id start saving up early for the future kids' college (or private school) fund...college in 20 years is gonna be uber-expensive. maybe set up a 529-plan.

Answer 9

Put the money into a savings account for your short term goals (ie; kids).

BTW: You're doing great. You should have a wonderful, financially worry free retirement............. GOOD LUCK!