Author Topic: Maxed out IRA. What next?  (Read 534 times)

karenturner

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Maxed out IRA. What next?
« on: May 10, 2019, 04:26:30 PM »
I'm in my 50s and maxed out my 401k/IRA contributions. Is there any recommended advice on where I should put money to save? Curious what other savvy savers have done. Also, what do people think about Annuities?

cincystache

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Re: Maxed out IRA. What next?
« Reply #1 on: May 10, 2019, 04:33:13 PM »
great job! Just open a taxable brokerage account at vanguard and put any excess into the funds you like. (VTSAX/VBTLX for example)

Annuities are a waste for 99.999% of people.

karenturner

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Re: Maxed out IRA. What next?
« Reply #2 on: May 10, 2019, 04:45:53 PM »
Thanks cincystache! Curious to hear why you think annuities are bad?

From scouring google, I find that there are mixed opinions and I'm a little confused. Isn't it essentially a form of pension or guaranteed income for life.

dandarc

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Re: Maxed out IRA. What next?
« Reply #3 on: May 10, 2019, 04:52:06 PM »
Thanks cincystache! Curious to hear why you think annuities are bad?

From scouring google, I find that there are mixed opinions and I'm a little confused. Isn't it essentially a form of pension or guaranteed income for life.
A Single Premium Immediate Annuity is possibly a defensible choice - you're buying a pension, the market / product is well understood and there's enough competition that there isn't that much price gouging going on.

Most other annuities are more like whole life insurance - may have a valid use, but far more is sold every year than there are valid cases. Mostly appropriate for the extremely wealthy.

There is nothing wrong with a taxable investment account once you've maxed out your tax-advantaged space.

Laserjet3051

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Re: Maxed out IRA. What next?
« Reply #4 on: May 10, 2019, 05:00:37 PM »
I dont know enough about your situation to provide specific advice but wanted to chime in say that for those folks who want to de-risk outliving their money, there is nothing wrong with allocating some % of net worth to a SPIA. A main risk of SPIAs is the company you buy them from going bankrupt, or if you dont purchase an inflation-rider (payments indexed for inflation), high future inflation could eat you alive.

the_fixer

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Re: Maxed out IRA. What next?
« Reply #5 on: May 11, 2019, 08:53:59 AM »
Can you invest in an HSA?

That would be the next place I would look.

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MDM

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Re: Maxed out IRA. What next?
« Reply #6 on: May 11, 2019, 06:26:22 PM »
I'm in my 50s and maxed out my 401k/IRA contributions. Is there any recommended advice on where I should put money to save? Curious what other savvy savers have done. Also, what do people think about Annuities?
Last question first: as the other posters have said/implied, in general annuities are a great deal for the person who sells them, not for the person who buys them.  See Category:Annuities - Bogleheads if you need more opinions.

The generic advice that can serve most people for "what next?" is Investment Order.

JLee

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cincystache

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Re: Maxed out IRA. What next?
« Reply #8 on: May 12, 2019, 07:44:18 PM »
Thanks cincystache! Curious to hear why you think annuities are bad?

From scouring google, I find that there are mixed opinions and I'm a little confused. Isn't it essentially a form of pension or guaranteed income for life.

@karenturner I think others have already provided some good input on why annuities are sub-optimal. It also depends on your investing comfort level. I think the only form of annuity I would consider recommending is a SPIA (single premium immediate annuity). The income from annuities is taxable as ordinary income which makes tax planning more difficult, the income often doesn't increase with inflation or if you buy an inflation adjusting benefit your monthly income is substantially lower. The assets are typically gone when you die instead of passing to your heirs or charity.

A family friend got absolutely screwed by an annuity salesman that convinced him to rollover his 401k into an IRA and invest in some variable annuity garbage. He took assets that were already tax deferred and put them in another layer of tax deferral(pointless). On top of that the fees are higher than 2% per year AND they have surrender fees for 8 years from the purchase date of up to 18%.

The only person that won in the transaction was the salesman who got away with a 10% commission.

Dicey

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Re: Maxed out IRA. What next?
« Reply #9 on: May 12, 2019, 08:29:46 PM »
https://forum.mrmoneymustache.com/investor-alley/investment-order/
Thanks JLee for saving me the trouble of digging it up. What a great community we have here.