Author Topic: Suggestions on investments  (Read 1376 times)

DarinC

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Suggestions on investments
« on: August 17, 2014, 02:16:24 PM »
Hello! I'm looking for suggestions on investment strategies for myself, my mother, and my grandmother. My mother and myself both have ~$50k, and my grandmother has ~$100k, all coming out of CDs near the end of this year/beginning of next.

For my grandmother's stash, I'm looking for something that would yield decent returns, maybe ~3-4% excluding inflation, with a minimum of risk because she might need that money for care/etc on short notice... The same applies to my mother, but with a little more risk tolerance.

I would like to use my chunk to start my own portfolio for FIRE. My plan is to split my savings between pre-tax 401k contributions and post-tax investments. Once I reach ~$250k in post tax investments, I should be able to generate ~$10k in earnings, enough for me to live off of, while I go back to school/build a house/do whatever.... and also leave with enough deductions to rollover ~$10k from my 401k into a Roth IRA without paying income taxes on that amount.

Does anyone have any suggestions about how to invest or constructive criticism about my FIRE plan?
« Last Edit: August 17, 2014, 02:22:57 PM by DarinC »

RyeWhiskey

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Re: Suggestions on investments
« Reply #1 on: August 17, 2014, 06:14:22 PM »
1. Your grandmother: It's difficult to say what she'll need without her total finances, but you probably don't want to risk that much of her cash in anything beyond a CD or short term bond fund. EverBank is offering 2.30% 5-year CDs according to Bankrate.

2. Same situation re: your mother and her finances, but she may consider an intermediate term bond fund or a conservative allocation fund which is low-cost and adequately diversified (Vanguard Target Retirement or LifeStrategy are both good choices).

3. You: don't forget your Roth IRA and HSA accounts. I'd invest in low-cost, diversified, broad market indexes and at the risk tolerance I felt was reasonable. Only you can say what this is. I'm also skeptical that you can live off 10k a year (rent? utilities? groceries?). Perhaps there's more to this story?

DarinC

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Re: Suggestions on investments
« Reply #2 on: August 19, 2014, 10:19:05 PM »
Thanks for the suggestions! I'll take a look at some bond funds. My family had some good luck with CDs in the past few years (all of ours had ~3-4% interest), but there isn't as much out there.

My plan is to build up my 401k and a couple Roth IRAs in parallel. Assuming I can live off of ~$10k/year, I would take a SEPP distribution from one of the IRAs, and concurrently rollover ~$10k/year from my 401k to the other IRA.

Currently, ~$10k/year is sufficient for me since I have no debt and don't pay for housing. If that changes, then it could be a stretch, but it depends where I am. Excluding housing/utilities, I maybe need ~$6k/year for the essentials (food, transportation, insurance, cell, maintenance, random toys). If that changes then I'll need to increase the amount I've saved in the IRA I'm taking SEPP distributions from, but I don't think that'll happen given my living situation.