MM Advice on a $25k windfall

[francis]

We have a $25k windfall coming our way that I'd like to invest.  We have 3 months savings in our e-fund; I want to take $7k and add one additional month to the fund, leaving us with $18k.  We are also about to embark on a significant home renovation, but have saved about 25% more than our budget, so I feel comfortable putting this money into an investment rather than just sticking it in a regular savings account for now.

Both DH and I have Roth 401ks through work and we contribute the max.  I have a Roth IRA that I rolled over from a traditional IRA & paid the taxes, so it's growing tax free, but I make too much to contribute now. We also have regular IRAs that we do not contribute to in favor of the 401ks, besides we can't deduct contributions there either.

Should I just go the Vanguard route here?  This would be our first brokerage account (I feel like such a rookie).  We both buy some of our own company stock, but other than that, no brokerage.  Advice?

[AAM2012]

Any debt?

You could invest with Vanguard. I always have the same response so here goes....on vanguards website you can answer questions about your risk tolerance, when you need the money , etc and it'll give you recommended funds based o your specific answers.

[francis]

No debt.

[hamster]

Take a vacation and invest. We use scottrade for our taxable account.

[Deleted]

Ditto vanguard. Congrats!

[purpleminion]

Sorry to hijack, but is Vanguard just an online thing, or do they actually have brick and mortar locations? I don't know if we just don't have any here, or what. Maybe that's a dumb question, but I always wonder when people recommend it.

[iheartbanjos]

We do Vanguard for non-retirement investments, which is what I would suggest.

We also have 2 529's and 2 IRA's with Vanguard, so it's nice to have it all in one place.

IIRC, there is a pretty significant drop in fees once you reach a balance somewhere in the 20,000's, so it might be worth it to invest more of the $25K.

Congrats on the windfall!!

[my3bears]

Mar 2, 2015 23:05:09 GMT -5 @domerjen said:

They aren't brick and mortar like scott trade... I think they are out of N. Dakota? I might be making that up. To my knowledge they don't have branches.

I <3 vanguard. They are super easy to work with and their website is great. We have a little money at scottrade and getting it out is ridiculously cumbersome (you have to go in person to an office, during business hours, of course.

They're based just outside of Philly in Valley Forge, PA. I drove by it all the time growing up

Also love vanguard, unrelated to location. Low fees mean more $$$ for me to compound year after year!

[francis]

Mar 3, 2015 3:54:00 GMT -5 RockNVoll said:

If you don't plan to actively trade in a traditional IRA account it's probably not worth it for you to open one since the only real benefit to a non-deductible traditional IRA is the tax-free gains while funds are in the account.

Depending on your current tax bracket, you might want to look into changing some of your 401(k) contributions to a traditional rather than Roth account. This all depends on where you think both your personal tax bracket and tax rates overall will be in your retirement years, but there's something to be said for hedging your bets by having some retirement money in pre-tax and some in post-tax accounts.

I'm not sure I would beef up the e-fund anymore. Since you have Roth IRAs already, the contributions (not the gains, just the contributions) can act as additional e-funds since they can be withdrawn at any time for any reason tax- and penalty-free. You're a little behind on retirement based on your DH's age so I would invest the full $25K.

Thank you for this advice, especially regarding additional contributions to the e-fund. Right now, about half of our retirement savings is in a traditional IRA, and the other half is in Roth IRAs and Roth 401ks.  Sorry, probably should have clarified that earlier. I opened a traditional IRA about 5 years ago, but there's only a penny in it right now.  It's basically there in case we decide to start contributing to it.  We are in the 28% bracket.  I tend to believe our bracket will be the same or higher at retirement.

I do feel a little behind the 8 ball in terms of the amount we have saved right now. A good deal of our general savings is liquid cash that we have been stockpiling for our house project. Now that the project is off the ground, I think we can more aggressively save for retirement.  

Thanks again!

[SJ]

I don't have any major critiques- it sounds like you are doing well and on a good path.

I would advise investing as much of the $25K as you possibly can. Sounds like you have an e-fund in place and as RockNVoll mentioned Roth contributions can also be withdrawn in an emergency.

Do you currently add to cash savings on a monthly/regular basis? If so, you could switch those to deposit into your investment account.

[francis]

Mar 3, 2015 9:34:22 GMT -5 SJ said:

Do you currently add to cash savings on a monthly/regular basis? If so, you could switch those to deposit into your investment account.

Yes, we have been aggressively saving cash for the last 2 years in preparation for selling our old house, purchasing the new house and doing some remodeling.  We kept the funds in a regular savings account because we knew that we'd need to have fairly quick access to them when the right property became available.  Now that the house is in the bag and the remodel is underway (and we have a cushion for those costs), we can redirect some of those funds into an investment account.