Risk adverse spouse about investing

[Livethedream]

I am 31, she is 28, 2 kids.
Next year we will start having extra income to invest. Currently we max our ROTHS, and I have a required pension at work. She has uncomfortably agreed to keep funding our Roth’s each year, and does like the idea even though it’s a bit “sketchy” to her. I’ve explained, showed her, let her look on her own about mutual funds, SWR, and other applicable information.

She is open to contributing some of the extra to one of the tax advantage plans I have at work (457, Roth 457, 401k, Roth 401k). We haven’t settled on a figure yet, I’m thinking she will probably be ok with around $18k. This would be with Savingsplus.

That will still leave $20k give or take depending on bonuses, that will need to be invested.

I would prefer putting another $18k in one of my work accounts. She is making it pretty clear that is not something she is interested in doing.

She isn’t sure what she would do with the other $20k, but does want to invest it. Her, and I agree, one idea is to save it up for a rental or flip. We have rentals and have flipped before, but where would we park the money over the next 5-7 years?

I know annuities have drawbacks, but if she is unwilling to do mutual funds for the remaining amount, or if not used for real estate, is this something we should consider doing?

#1. We make financial decisions together, in agreement
#2. We have paid for rentals, she grew up doing rentals and likes that she can “touch it”

[Livethedream]

Does she have something in her personal or family history that makes her so uncomfortable with the stock market? 

Does she have an IRA in her name?  If there is a history of divorce/post-divorce financial struggles in her family that might be something she is concerned about.

Real estate is a good way to diversify, so if she is more comfortable with that it would probably be the path of least resistance.

As long as she isn't pushing to spend it all, you're in a better place than most.

Yes, she has IRA in her name. We also talked about identifying in trust how my retirement account would be split in case of divorce since more would be in there.

Her parents gained/“lost” a sizable chunk in the .com era in a 401k from their business. Her mom has basically scared her over the years about it. Simple story: started at $400k, spikes to $1m, dropped to $700k all in like a 5 year span. So her mom has conditioned her to think they “lost” the difference to when the market corrected.

Her dad has created a very big nest egg from real estate, she looks up to him and he has never been a big mutual fund investor.

[Rob_bob]

An annuity is a great way to help the sales agent pay for his BMW or boat.

$400k to $700k in 5 years sounds like a pretty good return to me, why be scared of that?

[Mr Mark]

Avoid an annuity like Ebola.

What about investing in real estate via REITs? VNQ ( vanguard reit fund) is yielding 4.8% and is well below last years' peaks. Best in a tax sheltered account as dividends taxable.

She'll own a piece of pretty much every office block, mall, apartment complex, cell tower, hospital and nursing home in the USA.

[Livethedream]

Avoid an annuity like Ebola.

What about investing in real estate via REITs? VNQ ( vanguard reit fund) is yielding 4.8% and is well below last years' peaks. Best in a tax sheltered account as dividends taxable.

She'll own a piece of pretty much every office block, mall, apartment complex, cell tower, hospital and nursing home in the USA.

Good advice, will look into that.

[Car Jack]

iBonds
CDs
Total Bond Fund
High Yield Savings Account

These are low/no risk.  I'd think that perhaps her portion of "investment" might be in this stuff.  You can then invest in the stock funds to increase potential future gain.

It's interesting that she feels rentals are safe.  To me, rentals are huge risk from il-liquidity, potential for value loss, potential for rental loss/damage and the labor that has to go into them.

[Scandium]

So she's scared of investing in diversified mutual funds, but ok with spending 100s of thousands on a single house which could burn down the next day, renting it out to strangers hoping they will pay and won't trash it, the local economy doesn't crash, and you can sell the house for a profit 20 years later? Uhm, ok..

Don't have advice, but that's a bit strange. If she's scared of one I would except she'd be scared of the other too.

[CorpRaider]

What kind of returns do you guys expect on single family rentals?  Maybe that's not such a bad option. 

According to Professors Dimson and Schiller, it doesn't seem like sf homes beat inflation by much if capital expenditures are properly accounted for; but there seems to be a lot of purported "alpha" in the FIRE community (maybe its just indirect compensation for labor).

If you are doing traditional retirement accounts, maybe you could analyze those and then highlight the tax benefit to make the decision. 

Even if you had to put it into short term bonds or like the guaranteed investment contract option, you're getting a real yield on that now.  If you were saving pretax in a ~30% marginal rate and planning to withdraw at 0-10% seems like that might be attractive, even if you only compound at 1 or 2% real, once the money is in the account.

Women are empirically, better investors on average.  It is worth considering that she may have better emotional foresight and anticipates that you both are likely to freak out, like her parents did in the dot com bubble, when the next crash comes and be likely to reallocate at the wrong time.

[Financial.Velociraptor]

If Real Estate Investing is where the SO is comfortable, I think you need to focus on that.  Maybe see how she feels about real estate oriented funds such as VNQ, which I think is a real bargain right now.