Author Topic: advice for investing $5500 monthly for just 14 months  (Read 1382 times)

KyDustBunny

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advice for investing $5500 monthly for just 14 months
« on: December 23, 2018, 02:15:18 PM »
NEW here!

You all are SOOOO INSPIRING!
Hubby & I followed Dave Ramsey steps to get us this far
(4 kids all through college, primary home paid off, 2 rental properties with a small mortgage on 1 of them).
WISH we would have found you SOONER! 

We didn't DREAM about pulling the plug on our jobs (I think you call it "getting FIred"?) until we found MMM.

We've been crunching #'s and building speradsheets the last few days,
and realized that, by plugging a few holes in our otherwise frugal budget,
we believe we could save enough $$ to retire in just 14 months.

My Q to you:
If we save $5500 each month, is there a good place to put it /invest it, other than my non-interest bearing savings account?
We may opt to work a few months longer, but would eventually need easy access to the money to live on until we start pulling 4% out of our 401k
at age 59 1/2 (we know we can pull it early, but don't want to).

I look forward to your recommendations.

In the meantime, just know that I am THRILLED to be here!
Looking FORWARD to learning MORE!

Sincerely,
the DustBunny from N Kentucky


braje

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Re: advice for investing $5500 monthly for just 14 months
« Reply #1 on: December 23, 2018, 02:29:39 PM »
At what age are you thinking of retiring? I ask because, if you leave your job at age 55 or later, you can pull money penalty free from 401k. This is not true for IRAs.

Gin1984

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Re: advice for investing $5500 monthly for just 14 months
« Reply #2 on: December 23, 2018, 03:37:56 PM »
At what age are you thinking of retiring? I ask because, if you leave your job at age 55 or later, you can pull money penalty free from 401k. This is not true for IRAs.
Each company can chose to allow people to pull at 55, they are not required to.  Check your plan before counting on this.

Kronsey

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Re: advice for investing $5500 monthly for just 14 months
« Reply #3 on: December 23, 2018, 03:44:43 PM »
NEW here!

You all are SOOOO INSPIRING!
Hubby & I followed Dave Ramsey steps to get us this far
(4 kids all through college, primary home paid off, 2 rental properties with a small mortgage on 1 of them).
WISH we would have found you SOONER! 

We didn't DREAM about pulling the plug on our jobs (I think you call it "getting FIred"?) until we found MMM.

We've been crunching #'s and building speradsheets the last few days,
and realized that, by plugging a few holes in our otherwise frugal budget,
we believe we could save enough $$ to retire in just 14 months.

My Q to you:
If we save $5500 each month, is there a good place to put it /invest it, other than my non-interest bearing savings account?
We may opt to work a few months longer, but would eventually need easy access to the money to live on until we start pulling 4% out of our 401k
at age 59 1/2 (we know we can pull it early, but don't want to).

I look forward to your recommendations.

In the meantime, just know that I am THRILLED to be here!
Looking FORWARD to learning MORE!

Sincerely,
the DustBunny from N Kentucky

Welcome to the forums!

In my opinion, no one can really answer what to do with the $5,500 until getting a more complete picture of your finances.

What do you need the money to grow to in 14 months? Or asked another way, how much do you need to pull from that sum on a monthly basis to meet your FIRE goals?

If you're comfortable, a good place to start would be listing all assets, all liabilities, your current monthly spending rates, etc.

Follow this guide for help: https://forum.mrmoneymustache.com/case-studies/how-to-write-a-'case-study'-topic/

TomTX

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Re: advice for investing $5500 monthly for just 14 months
« Reply #4 on: December 23, 2018, 04:54:22 PM »
Why do you use a non interest bearing savings account when getting ~2% is pretty darn easy?

https://www.discover.com/online-banking/savings-account/

Moderate effort can get you more.

cawiau

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Re: advice for investing $5500 monthly for just 14 months
« Reply #5 on: December 24, 2018, 01:01:26 AM »
At what age are you thinking of retiring? I ask because, if you leave your job at age 55 or later, you can pull money penalty free from 401k. This is not true for IRAs.
Each company can chose to allow people to pull at 55, they are not required to.  Check your plan before counting on this.

Actually it is not up to the company... the account (401k) just need to be from your recent employer that you just left (not a 401k from an old employer 2-3 jobs ago).

Which makes the argument to roll over your old 401k’s into your most recent one before pulling that move this way you have access to everything.


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Gin1984

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Re: advice for investing $5500 monthly for just 14 months
« Reply #6 on: December 24, 2018, 08:34:17 AM »
At what age are you thinking of retiring? I ask because, if you leave your job at age 55 or later, you can pull money penalty free from 401k. This is not true for IRAs.
Each company can chose to allow people to pull at 55, they are not required to.  Check your plan before counting on this.

Actually it is not up to the company... the account (401k) just need to be from your recent employer that you just left (not a 401k from an old employer 2-3 jobs ago).

Which makes the argument to roll over your old 401k’s into your most recent one before pulling that move this way you have access to everything.


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That is not true. I know companies that do not allow it. The IRS allows it but does not require it.

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radram

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Re: advice for investing $5500 monthly for just 14 months
« Reply #7 on: December 24, 2018, 11:13:45 AM »
At what age are you thinking of retiring? I ask because, if you leave your job at age 55 or later, you can pull money penalty free from 401k. This is not true for IRAs.
Each company can chose to allow people to pull at 55, they are not required to.  Check your plan before counting on this.

Actually it is not up to the company... the account (401k) just need to be from your recent employer that you just left (not a 401k from an old employer 2-3 jobs ago).

Which makes the argument to roll over your old 401ks into your most recent one before pulling that move this way you have access to everything.


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That is not true. I know companies that do not allow it. The IRS allows it but does not require it.

Sent from my SPH-L720 using Tapatalk

I don't know who is right, but how can any company refuse to release 401k money when the holder asks for it? Even if they withhold the 10% penalty before releasing the rest, won't you just get that back one you file taxes? The penalty does not go to the company, it goes to the government. Once you prove it was qualified, you will get it back, right?

Catbert

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Re: advice for investing $5500 monthly for just 14 months
« Reply #8 on: December 24, 2018, 12:26:15 PM »
I think you guys are arguing over 2 different things.  1/if you leave employment during the year you turn 55 there is no IRS penalty for withdrawing 401k money.  Employers don't have a choice.  2/employers can opt (but are not required) to allow in-service withdrawals if you are still working there.  OP should, of course, not rely on my memory for these things.
« Last Edit: December 24, 2018, 04:35:29 PM by Catbert »

Catbert

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Re: advice for investing $5500 monthly for just 14 months
« Reply #9 on: December 24, 2018, 12:34:40 PM »
OP - I would suggest looking at your spending needs for the next 5 years and determine how best to fill the need.  That could be pension, rental income, capital gains generated by mutual funds, dividends, etc. Then you need to figure out if a Roth conversion ladder is necessary.  And then sort out a tax and ACA strategy. 

 If some of that income in the first 5 years needs to come from the monthly 5K you're saving now, then I would keep much of it in cash or cash equivalents.

cawiau

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Re: advice for investing $5500 monthly for just 14 months
« Reply #10 on: December 24, 2018, 05:59:34 PM »
I think you guys are arguing over 2 different things.  1/if you leave employment during the year you turn 55 there is no IRS penalty for withdrawing 401k money.  Employers don't have a choice.

That is what I was stating... the employer has no choice in the matter! No employer does...


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cawiau

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Re: advice for investing $5500 monthly for just 14 months
« Reply #11 on: December 24, 2018, 06:02:18 PM »
At what age are you thinking of retiring? I ask because, if you leave your job at age 55 or later, you can pull money penalty free from 401k. This is not true for IRAs.
Each company can chose to allow people to pull at 55, they are not required to.  Check your plan before counting on this.

Actually it is not up to the company... the account (401k) just need to be from your recent employer that you just left (not a 401k from an old employer 2-3 jobs ago).

Which makes the argument to roll over your old 401k’s into your most recent one before pulling that move this way you have access to everything.


Sent from my iPhone using Tapatalk
That is not true. I know companies that do not allow it. The IRS allows it but does not require it.

Sent from my SPH-L720 using Tapatalk

A company cannot NOT allow it... you are no longer an employee, they no longer have a right to control your assets or a say on how you choose to use it.

You have to prove to the IRS when you file your taxes that:
A) you are 55 or more
B) the money is from your most recent employer 401k
C) they waive the penalty.


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RWD

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KyDustBunny

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Re: advice for investing $5500 monthly for just 14 months
« Reply #13 on: December 25, 2018, 11:05:15 AM »
Hello Again MMM'ers and Thanks for all of your input.

Sorry.. I didn't mean to cause a tussle about early 401k withdrawals.

To clarify, from my original post, we have no intention of dipping into our 401k early / before 59 1/2.
And, they could be wrong, but we talked to 2 financial advisors recently who both stated that we could withdraw from our 401k EARLY with a
72t.   I'm pretty sure neither of them checked with our employers before they advised us of this.  For what that's worth.

**
The $$ we plan to sock away will strictly be used to help cover our "Gap years".... 2 years before the 59 1/2 age mark.
We are comfortable with the rest of our finances and beyond (although I do intend to surf here for extra ideas !!!)  so my interest in my original post
was limited to whether or not there is some place we could park our funds on a short term basis that would help us earn some extra cas.


TomTX's reply about Discover's interest bearing savings account hit the mark.
When our holiday celebrations are finished, I plan on digging into that idea more.

THANKS for ALL of your help.
I wish you all PEACE today and in the New Year.

Merry Christmas!

TomTX

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Re: advice for investing $5500 monthly for just 14 months
« Reply #14 on: December 25, 2018, 01:48:09 PM »
Happy to help - don't mind the extended discussion. It's going to happen in one thread or another anyway ;)