I have already maxed my 401k and IRA this year, I heard I should invest in a no load fund, how do I do that?

Question

I have already maxed my 401k and IRA this year, I heard I should invest in a no load fund, how do I do that?
do I just buy one online or do I go to a person, vanguard has a Target Retirement 2040 Fund, should I invest in that or is there something I can invest in after I maxed out my 401k and IRA, I have about $3,000 extra to invest long term, my income is 35,000 and my husband is 35,000, we do not make that much, but I want to save as much as possible, what should I do with this money........ I already have enough savings for 8 months worth of bills, I need to start now before I spend the money on things I do not need, I would like to buy something that does not have much fees or any hidden things attached (new to this kind of stuff)

Answer 1

Mutual funds can be a good option, but you have to decide which fund(s) fit your needs. All have different strategies and fee structures. Low fees are nice, but make sure you are getting good performance as well. The most important thing is to look at the fund manager, the manager's expertise is what you are paying for. You might consider how long the manager has been at the fund (longer = better) especially when looking at returns over time. Morningstar is a good resource.

You might also look into ETF's (exchange traded funds). These are slightly less beginner-friendly but can have much lower fees and you can manage your tax obligations better.

You might consider finding a financial planner (not a broker) to help you with these decisions.

Answer 2

Just so you know, the Vanguard Target-Date Retirement Funds are fund-of-funds that invest in their index funds. So, I am not sure why the previous poster has a problem with their retirement funds and then praises their index funds.

Well, one option is to invest this in a regular taxable account. Keep in mind that you will pay taxes every year on capital gains within the fund and any interest or dividends paid. Also, when you eventually sell mutual fund shares, you will have to figure out the capital gains tax which is probably gonna be tricky. You will likely wind up with a few hundred tax lots because each time you invest new money (or the distributions are reinvested), it will buy new shares at a slightly different price. Thus, the capital gains will be different for each lot.

You may want to consider a low-cost variable annuity. Hear me out, now. Most variable annuities are crap because of the very high cost. However, Vanguard and Fidelity have the lowest cost variable annuities around. Vanguard charges a 0.3% mortality expense and the funds have a 0.2 - 0.4% expense themselves. So, you are looking at total annual expenses in the 0.5 - 0.7% range for most funds. And, there are no loads and no surrender fees with Vangaurds variable annuity.

A variable annuity is tax-deferred and you will not have to deal with capital gains taxes. So, this is the advantage. If your time horizon is long, then the extra earnings from not having to pay taxes will outdo the slightly higher costs with the variable annuity. (I use one myself becuase I also have my 403(b) and Roth IRA maxed out.)

However, be aware that variable annuities are more complicated than a regular custodial account. Read their prospectus carefully. Also, if you withdraw earnings before age 60, you will be assessed an additional 10% tax penalty. Also, I think you need a minimum of $5000 to start a Vanguard variable annuity. Also, the Vanguard Variable Annuity does not have their target-date retirement funds, for some reason. However, they do have the 3 basic funds: total bond market index fund, total domestic stock market index fund, and a general international stock fund. So, you can create any portfolio you need with those 3 funds. That is how I do it.

Or .... if you have a house and a mortgage, why don't you use that money to make extra payments. You get a guaranteed return equal to the interest on your mortgage. If you do not have a house, then consider keeping that money in a money market account for the downpayment of a house.

I have a free downloadable book on retirement investing at http://www.invest-for-retirement.com that is designed for beginners. In particular, chapters 19 and 23 are the most useful. Also, the book Mutual Funds for Dummies, by Eric Tyson is an excellent book for beginners.

Answer 3

Target Retirement 2040, and most other mutual funds (no-load or not) are a bad deal in general and especially in a taxable account. Mutual funds like the Target series have no loads, but the management fees will hurt you badly over the long term. Worse, they continually throw off taxable income. The only Vanguard funds worth considering are their index funds, which buy a basket of stocks and don't trade them. They have very low fees and minimal tax impact.

I'd guess your 401(k) is overloaded with bonds and/or "safe" funds of giant, mature companies, and your IRA must be at a bank, where you'll barely keep ahead of inflation. If that's the case then I think in your taxable account you should branch out with an international index fund. Over long periods adding an international fund increases a portfolio's returns and reduces volatility. I also think everyone should have some small companies in their portfolio, but that might have to wait until next year.

With 33 years or so until retirement, it's crazy to play it safe. You can afford to be aggressive because you've got time to recover from bad years.

And congratulations on saving so diligently.

Answer 4

The vanguard target retirement fund would be a very good choice. You can contact vanguard through their website (www.vanguard.com) or by phone (the number is in their website), and they'll tell you how to open an account. Vanguard generally has low cost funds.

Answer 5

4 years interior the previous my sister question me to help her in this comparable undertaking. I recognised at her place of work artwork and have been given disgusted. for a fashion her 401K labored is the money have been given invested in money expenses that invested contained in numerous inventory expenses , no longer direct investment. Getting removed from that situation--my sister had sixteen distinctive expenses she ought to located money into. I reported to her to place 10 % into the midsection 10 expenses in probability. She lost her activity some 365 days interior the previous. whilst she drew it out she substitute good right into a pair of thousand greenback before than what she located it. She substitute into happy. So in fact , I propose spreading the money into as many expenses by way of actuality the plan will enable. some would bypass down , some would bypass up in value.

Answer 6

invest in commodities...go to a CPA and get a portfolio done