Author Topic: Non qualified vs qualified investing  (Read 220 times)

Portis

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Non qualified vs qualified investing
« on: April 18, 2020, 05:28:33 AM »
I'm looking for advice and/or some good reading to help my wife and I decide where to put our money.  We are at the point where we can start throwing a decent percentage of our income for investing, and I'm becoming convinced that it could be worth it to only invest up to the match in our qualified retirement accounts, and then put the rest in non qualified brokerage account.  The biggest reason: liquidity is very attractive to us.

I see some major expenses coming up in the next 5-20 years that we would not want to access our emergency fund for.  Here are some of the things I'd imagine us access this proposed brokerage account for:

1) we both have old cars over 200k miles

2) we own an old house, 150 years old.  Seems to be in good shape, but you never know

3) 2 young kids, so college is more the 15-20 year range, but I have my reservations with 529s ( a. I don't think college is a required route for everyone, b. I don't want to create a disincentive for us to minimize college expenses as much as possible because we have savings set aside that can only be used for education)

4) we are unsure where we want to go with our financial future.  My wife likes that idea of having rental properties, while I'm okay with that, but I also don't want to have multiple mortgages.  For us to save the required money to buy outright, it would probably be smart to have compound interest help us out.

5) Kind of like reason 4, but I like the idea of having access to money to take advantage of opportunities as they come.  We both have a lot experience and success in retail and restaurants, so it may be nice to have our business someday, or buy real estate if there's a deal that comes up... however the opportunity takes form, I like that idea of having the freedom to not let it pass by.

As far as retirement, if we continue to go up to the match, we have enough to have a comfortable "traditional" retirement, so its not like us accessing this brokerage money would be taking away from our retirement per se.

Thanks for your thoughts

terran

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Re: Non qualified vs qualified investing
« Reply #1 on: April 18, 2020, 06:47:34 AM »
Have you seen the stickies at the top of the Investor Alley forum? The recommended investment order, and How to access your How to withdraw funds from your IRA and 401k without penalty are applicable to your question.

Remember that you can always withdraw your contributions (but not gains) from your Roth IRA, so you should at least max those out.

As far as college goes, remember that your kids can borrow to fund college, you can't borrow to fund retirement. Put your own oxygen mask on first and all that. Also consider the effect of taxable accounts vs retirement accounts on financial aid.

I also wouldn't invest money you expect to need within the next 5 years. Some of the things on your list sound like expected expenses (like the cars), which are part of your normal spending, they just happen infrequently. You should be saving for these, but probably not investing for them. It kind of sounds like your emergency fund is too small for the things in your life that you expect to break.