Author Topic: Where to put our bonus?  (Read 3642 times)

jscott2135

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Where to put our bonus?
« on: March 14, 2016, 10:38:34 AM »
Husband just got a 10k bonus (after taxes).  We already contribute to a 401k.  I'm just now learning about IRA's and investment options.  I was originally going to just put it on our mortgage but that seems silly since our interest rate is so cheap (3.5%) and want this $ to work as hard for us as possible. Roth IRA?

In addition, can anyone suggest some intro blogs/reading that can get me started on the right path to investing smartly for early retirement..late :) (I am 34/husband is 42) we have no debt other than mortgage but he could care less about learning about this, although he doesn't mind what I do with the $, so its on my shoulders to start to figure this out.

nereo

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Re: Where to put our bonus?
« Reply #1 on: March 14, 2016, 10:47:50 AM »
Husband just got a 10k bonus (after taxes).  We already contribute to a 401k.  I'm just now learning about IRA's and investment options.  I was originally going to just put it on our mortgage but that seems silly since our interest rate is so cheap (3.5%) and want this $ to work as hard for us as possible. Roth IRA?

In addition, can anyone suggest some intro blogs/reading that can get me started on the right path to investing smartly for early retirement..late :) (I am 34/husband is 42) we have no debt other than mortgage but he could care less about learning about this, although he doesn't mind what I do with the $, so its on my shoulders to start to figure this out.

1) if you are earning as much as your post suggests (but still udner the limits), a traditional IRA is probably the best choice for you.  You can each contribute $5500 ($11k total) per year.  Until April 15th you can contribute towards 2015, and then get to work contributing towards 2016 later in the year.

2) read http://jlcollinsnh.com/stock-series/.  In it he covers the ROTH vs traditional IRA topic, plus many, may other in easy to understand and digest posts.

relaxednature

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Re: Where to put our bonus?
« Reply #2 on: March 14, 2016, 12:47:51 PM »
Your Husband must work for the same company I do.. lol, last Friday was bonus day.

What I do each year is for that paycheck is adjust my 401k withholding to 50% (company max), I max my HSA based on whats left for me that was $2500.   Even with those 2 items, you will still get about a doubled paycheck in which case I stick with my normal plan of sweeping my account into taxable acct of whatever amount is over my hold line.

the jlcollins series listed above is a great start for a read.

farangster

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Re: Where to put our bonus?
« Reply #3 on: March 14, 2016, 01:41:28 PM »
you could open up an ira with Vanguard and purchase a total u.s. stock market fund, with a .05% management fee and minimum opening balance is $10,000......this is the cheapest you can get and it holds over 3700 u.s. stocks.  i think this is the best way to go for someone just learning about investing because it has the lowest expense and great diversity in one fund......but if investing in stocks, you need to commit and not touch it for at least 5 years, especially if you are opening up a traditional ira, which has fees and tax penalties associated with withdrawals.  You still have time to contribute up to $11,000 ($5,500 for each of your IRA's) for 2015 tax year before you file your tax return.  If you open traditional ira's, you will see a nice tax refund so make sure you do it before you file taxes.  a ROTH IRA will not give you an immediate tax refund but when you retire, after 59 1/2, all withdrawals will be tax free even if it increased over 200%.  here is the link to that vanguard total market fund-

https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&FundId=0585

FINate

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Re: Where to put our bonus?
« Reply #4 on: March 14, 2016, 02:03:30 PM »
Husband just got a 10k bonus (after taxes).  We already contribute to a 401k.  I'm just now learning about IRA's and investment options.  I was originally going to just put it on our mortgage but that seems silly since our interest rate is so cheap (3.5%) and want this $ to work as hard for us as possible. Roth IRA?

In addition, can anyone suggest some intro blogs/reading that can get me started on the right path to investing smartly for early retirement..late :) (I am 34/husband is 42) we have no debt other than mortgage but he could care less about learning about this, although he doesn't mind what I do with the $, so its on my shoulders to start to figure this out.

A word of caution: He might not care about it in the abstract, but what happens when the account value starts dropping? I think he needs to understand a bit how this works, the expectation that the value will jump around in the short term and occasionally lose a significant percentage, but holding on for the long haul provides solid returns on average. I think you both need to be on the same page/understanding on this. It's just too painful to watch friends and family repeatedly put money in the market only to pull it out at/near the bottom.

jscott2135

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Re: Where to put our bonus?
« Reply #5 on: March 14, 2016, 04:14:38 PM »
FINate - He really won't care (He already cares in the abstract, but he trusts my decision making...he makes the $$, I spend and invest it and pay bills, we are on the same page for sure, but its more of a he doesn't want to dedicate any of his brain space to learning it.  As long as I get to be in the driver seat that's fine by me, it works for us.) :)  He makes about 175k/year but I get entrusted in total with the finance portion.  I'm the one who will care more as I check in on the account and see it drop, but having the willpower to not touch it won't be a problem.  We have a lot of catching up to do.  I have been great about always keeping us out of debt, but investing has always got pushed aside and I am ready to amend that seriously now. He is likely even better at long term investing in theory because he doesn't get twitchy easily.  I may worry but I won't move on it.  We have about 170k in retirement currently and I've been watching it go down a bit without completely losing my mind.

FINate

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Re: Where to put our bonus?
« Reply #6 on: March 14, 2016, 05:13:05 PM »
FINate - He really won't care (He already cares in the abstract, but he trusts my decision making...he makes the $$, I spend and invest it and pay bills, we are on the same page for sure, but its more of a he doesn't want to dedicate any of his brain space to learning it.  As long as I get to be in the driver seat that's fine by me, it works for us.) :)  He makes about 175k/year but I get entrusted in total with the finance portion.  I'm the one who will care more as I check in on the account and see it drop, but having the willpower to not touch it won't be a problem.  We have a lot of catching up to do.  I have been great about always keeping us out of debt, but investing has always got pushed aside and I am ready to amend that seriously now. He is likely even better at long term investing in theory because he doesn't get twitchy easily.  I may worry but I won't move on it.  We have about 170k in retirement currently and I've been watching it go down a bit without completely losing my mind.

Good for you guys, sounds like you're doing fine.

As for your original question about reading material: I recommend Bogleheads' Guide To Investing, which should have all the info you need for a solid foundation.

PhysicianOnFIRE

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Re: Where to put our bonus?
« Reply #7 on: March 14, 2016, 06:54:18 PM »
A few more sites I can recommend:

Bogleheads  Link is to a forum.  The Wiki is great as well.  Vanguard / John Bogle followers dispense great advice here.

White Coat Investor With a high salary, you will find some sound advice here.  Financial advice for physicians and other high earning individuals.

Finally, my standard advice, You Need an IPS.

Best of luck!
PoF

dividendman

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Re: Where to put our bonus?
« Reply #8 on: March 14, 2016, 09:19:51 PM »
Cisco?

Mr.GrowingMustache

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Re: Where to put our bonus?
« Reply #9 on: March 15, 2016, 09:37:46 AM »
jscott, I found the Vanguard "Four timeless principles to help you reach your investment objectives" articles real helpful when trying to introduce my wife to investing for retirement.

There are four principles/bullets in the link, with their own pages. I recommend all four.

1. Goals
2. Balance
3. Cost
4. Discipline

https://personal.vanguard.com/us/insights/investingprinciples

cheddarpie

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Re: Where to put our bonus?
« Reply #10 on: March 15, 2016, 09:43:25 AM »
The Elements of Investing and Bogleheads.

You can do a backdoor Roth conversion - max out a traditional ira, then immediately roll over to a Roth. You can get the tax free growth of a Roth even though you are over the standard income limit.


Greenpez

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Re: Where to put our bonus?
« Reply #11 on: March 15, 2016, 04:54:35 PM »
 Its funny that you posted this. After recent bonuses, we also have 10kish to throw at ... something. I've mostly decided to go Roth IRA because I'll have access to the money if I need it and also am favoring it over a 529 for future schooling for kids. We are also pushing the income limit to be able to utilize it so may be under in the future.

 I know most people will say to do traditional when in this tax bracket but things are muddied a bit for us with two future pensions.

MickeyMoustache

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Re: Where to put our bonus?
« Reply #12 on: March 16, 2016, 07:04:23 AM »
I was in the same situation a little bit ago, unfortunately my wife blew $10k of it into the mortgage before I realized (lol).  I would have preferred to invest the $10k but oh well.  Thankfully the bonus was big enough to have a balance left over to invest after that mishap.  What I did with the rest of it was backdoor some Roth IRAs (i.e. open a tIRA and click "convert to Roth") for 2015 and 2016.  You can actually still contribute to and roll over a 2015 Roth IRA until the tax filing deadline.  Just keep in mind that if you go the Roth route, the entire process will take you about 2 weeks to complete unless you already have money sitting in your settlement fund to pull from.  2-3 days to pull money from bank, 2-3 days to open & invest in the tIRA, 2-3 days to convert, etc.  So if you wanted to truly maximize these vehicles, you'd max out your 2015 IRAs instead of opening 2016 because you have all year (and part of next) to do those.

However, since you are averaging $175k/year I would make sure you're already maxing your husbands 401k, 529s, and HSA if available, then Roth, and then taxable accounts.