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401K vs. CD's vs. ?

tapwatertapwater Member Posts: 10,335 ✭✭✭
edited February 2015 in General Discussion
..We have CD's earning next to nothing. I just got my 401 statement and it earned 4.6% last year. There are many of you here that have much more investment savvy than me. (nil) Anything else out there that I should have those CD's in that are fairly low risk but do better than less than 1% interest? I don't want anything that I have to manage personally as my investment skills are next to nothing. Thanks for any suggestions.

Comments

  • Ray BRay B Member Posts: 11,822
    edited November -1
    I lean toward precious metals, primarily brass & lead with a smidgen of Tungsten.
  • OakieOakie Member Posts: 40,519 ✭✭✭✭
    edited November -1
    Real estate. Donna and I buy and sell homes. We have always done pretty good without putting a lot out of pocket. I don't do any stocks unless they are no risk. I have about 500,000 in no risk stocks. The rest we have in property and other investments.
  • tapwatertapwater Member Posts: 10,335 ✭✭✭
    edited November -1
    Oakie, the only real estate we have is 80 raw acres in deep south MO, down near Drobs' place. I just don't feel like dealing with all of that. To sum up, I'm just plain lazy and don't know much of anything about real estate and flipping. I just know that I'd screw myself and be stuck with lemons! (Thanks though!)
  • wiz1997wiz1997 Member Posts: 1,051 ✭✭
    edited November -1
    Can you cash in the CD's without penalties or do you have to wait for them to mature? If you cash them out before they mature it'll cost you. If you need to keep the money readily accessible there is not much to choose from. Does your employer allow the transfer of additional monies into your 401k from other sources? Some allow additional contributions but they usually don't do any matching. If they don't allow additional contributions, I would look into a regular or Roth IRA. Roth IRA is good for money you have already paid income tax on. Everyone has different needs when it comes to investing, so what works for me may not for you.
    I remember when CD's would bring around 7%, my 401k was bringing over 10% and a savings account would bring in 3%. Heck my checking account used to get 1%. Check the plans in your 401k and see if a fund is available that manages things for you based on when you plan to retire. I hope to retire in 2028 so my investment fund is called the 2030.
  • tapwatertapwater Member Posts: 10,335 ✭✭✭
    edited November -1
    quote:Originally posted by wiz1997
    Can you cash in the CD's without penalties or do you have to wait for them to mature? If you cash them out before they mature it'll cost you. If you need to keep the money readily accessible there is not much to choose from. Does your employer allow the transfer of additional monies into your 401k from other sources? Some allow additional contributions but they usually don't do any matching. If they don't allow additional contributions, I would look into a regular or Roth IRA. Roth IRA is good for money you have already paid income tax on. Everyone has different needs when it comes to investing, so what works for me may not for you.
    I remember when CD's would bring around 7%, my 401k was bringing over 10% and a savings account would bring in 3%.



    ..As for "employer", I'm medically retired. The penalty for early cashing of CD's is minimal. Yes, I remember when our CD's were in the 5-7% range. That's why I don't feel too awful bad about the 401 at 4.6%. The savings account is down to something like .02%. What a waste.

    ..I've heard of the IRA's but frankly know nothing about them. I suppose my personal banker at our bank of 40+ years could explain that. Is that money available in an emergency? I know that we're not handling our savings wisely. Finances are complicated for me.
  • tapwatertapwater Member Posts: 10,335 ✭✭✭
    edited November -1
    ..By the by, we have stacks of U.S. savings bonds that I used to get taken out of my pay every month. We cashed in all the ones from the 1970's. Those were series "E" I believe, (?) and had matured, earning no more interest.
  • bigoutsidebigoutside Member Posts: 19,443
    edited November -1
    A few things leap out.
    Yes. There are other things you might want to invest in.

    A 401k(k) isn't an investment. It is a type of wrapper that is put around investments to keep the irs at bay until you retire. The investments are the things inside of that account. (Probably mutual funds)

    There is no such thing as a no risk stock. They don't exist.

    You should speak to a broker or financial planner.

    They should spend 30-60 minutes with you without making any recommendations

    Ask them how they are compensated up front. There are many different ways they can be. Some more/less palatable depending on your situation.
  • bartman45bartman45 Member Posts: 3,008 ✭✭
    edited November -1
    If you consult with a financial/planner advisor, do not deal with one without credentials certifying they are CFP - Certified Financial Planners, and use a "fee only" individual, meaning they are not paid by commissions from the companies and products they suggest. Avoid most types of annuities, as they pay the highest commissions and therefore are the most pitched by insurance and financial sales people.

    Best solution is to learn the basics and handle your own.
  • fordsixfordsix Member Posts: 8,722
    edited November -1
    do you think jim cramer is a millionair[:o)]
  • Don McManusDon McManus Member Posts: 23,458 ✭✭✭✭
    edited November -1
    I used to play with individual stocks, but decided that my time was better spent earning money.

    Still keep some individual stocks, mainly for the dividends.

    Still have some Treasuries that are paying between 5% and 6%.

    Most is in managed funds, however. Some is tax free bond funds, some in managed index funds, and some in other targeted funds.

    Managed, low cost funds are the answer for me because I do not want to spend the time required to make informed decisions on individual stocks.
    Freedom and a submissive populace cannot co-exist.

    Brad Steele
  • NeoBlackdogNeoBlackdog Member Posts: 16,565 ✭✭✭✭
    edited November -1
    Don't know about 401's, but the CD rates I've seen won't even keep you ahead of inflation. Our CFP got us into an IRA and it was up 16.8% last year. The boy's good!
  • 11b6r11b6r Member Posts: 16,588 ✭✭✭
    edited November -1
    "You should speak to a broker or financial planner."

    Yep- that right there.

    I have 3 different 401Ks. I can pick and choose the funds I want the money to be invested in. Right now, they are in mutual funds- one fund that divides it's money among the stocks in several companies, and in bonds that pay interest.

    While there is NOTHING that does not have some degree of risk, it is easy to look at the rating of a given mutual fund- high, medium or low risk. Low risk usually has a lower return- and a lower chance of value dropping like mad. High risk- you are gambling. Potentially high returns, high risk of losses. It is also very easy to look at the performance of a fund- this year, one year, 3 years, 10 years.
  • GuvamintCheeseGuvamintCheese Member Posts: 38,932
    edited November -1
    Shotguns!

    How many investments can you name that virtually guarantee a sizable return on your money while offering the added bonus of pride of ownership? Buying antique automobiles might be one, and collecting fine art is certainly another, but if you didn't say gun collecting, you missed one of the surest bets around. But first, what is a gun collector?

    http://www.outdoorlife.com/articles/guns/shotguns/2007/09/three-rules-shotguns-investments
  • firstharmonicfirstharmonic Member Posts: 1,059 ✭✭✭
    edited November -1
    quote:Originally posted by fordsix
    do you think jim cramer is a millionair[:o)]


    Yes, Jim Cramer is a millionaire. He now does his investing for a charitable trust. You can learn a lot from him - I did and I do all of our investing.

    But it does take a good length of time to learn and there are no guarantees. Since I'm retired we've wanted a very conservative profile (unlike younger guys that can afford to take higher risks) and since I took over managing our investments about seven years ago we've had a net annual return of about 5 1/4% after all fees - plus or minus a couple of basis points each year. And that's just where we want to be.

    It's not for everyone and it does take time and study but it's doable if you have the desire.
  • Don McManusDon McManus Member Posts: 23,458 ✭✭✭✭
    edited November -1
    quote:Originally posted by GuvamintCheese
    Shotguns!

    How many investments can you name that virtually guarantee a sizable return on your money while offering the added bonus of pride of ownership? Buying antique automobiles might be one, and collecting fine art is certainly another, but if you didn't say gun collecting, you missed one of the surest bets around. But first, what is a gun collector?

    http://www.outdoorlife.com/articles/guns/shotguns/2007/09/three-rules-shotguns-investments


    I have done quite well collecting firearms and to a lessor degree, ammunition.

    If I sold out today, that is.

    I am a little concerned that those who will appreciate a well-maintained Krag, 1903, Garand or M1 Carbine, as examples may no longer be around when I get to the point of selling.
    Freedom and a submissive populace cannot co-exist.

    Brad Steele
  • gearheaddadgearheaddad Member Posts: 15,096 ✭✭✭
    edited November -1
    quote:Originally posted by GuvamintCheese
    Shotguns!

    How many investments can you name that virtually guarantee a sizable return on your money while offering the added bonus of pride of ownership? Buying antique automobiles might be one, and collecting fine art is certainly another, but if you didn't say gun collecting, you missed one of the surest bets around. But first, what is a gun collector?

    http://www.outdoorlife.com/articles/guns/shotguns/2007/09/three-rules-shotguns-investments

    I like the way you think![;)]
  • victorj19victorj19 Member Posts: 3,642 ✭✭✭
    edited November -1
    If you don't have the CDs in an IRA already you cannot place them in one. However, you can open an ordinary investment account with either Fidelity or Vanguard. There are hundreds more such companies, but these two have a broad selection of low fee mutual funds to choose from.

    Unless you or your wife are working, you cannot contribute to an IRA. If your wife is working (your "medically retired"), she can open a IRA. There are 2 types. The traditional IRA which is funded by pre-tax contributions and taxed as income after you take the money out. The second is a Roth IRA which is funded with after tax contributions and after 5 years money taken out is tax free.

    Once you select a company (forms, info, etc. are available on-line) and establish an account (you can have joint, individual (wife & you), trad IRA, Roth IRA, etc.), you'll send them money and then select the mutual funds you want. Since you admit knowing nothing about the mutual funds I suggest you consider "target" funds. These are designated by a year in the fund's name. The farther out the year is, the greater the risk and the higher the return. An alternative is to invest in a fund that mirrors the S&P 500. You absolutely want to pick funds with without a "load" (a fee like a sales tax going to the company) and with low fees. My rule of thumb is to avoid any fund with fees over 1%.

    No matter what you choose to do, maintain a rainy day fund for unexpected bills (e.g., medical bills, large car repairs, appliances giving out, etc.) and large planned purchases (e.g., a new car)
  • MaaloxMaalox Member Posts: 5,160 ✭✭✭
    edited November -1
    Spend some time on the Vanguard website in their retirement planning area and you will get some good information. Someone mentioned target date funds which are a great idea for someone who wants to invest and only check in on their investments once or twice a year. The reason I prefer Vanguard is that that have many mutual funds with low expense ratios. If you are earning 8% but they take 1.5% in expenses you only net 6.5%. Change that to .3& and you net 7.7% a big difference.

    Be very careful with financial planners and especially those from Banks. Many are paid on commission and they will point you in the direction where they make the most commission. The fee based planners mentioned above are the best to go with. Also if they start the discussion talking about annuities be careful. There is palace for annuities but many planners like to sell these for their high commissions not for your benefit.
    Regards, MAALOX
  • OakieOakie Member Posts: 40,519 ✭✭✭✭
    edited November -1
    quote:Originally posted by tapwater
    Oakie, the only real estate we have is 80 raw acres in deep south MO, down near Drobs' place. I just don't feel like dealing with all of that. To sum up, I'm just plain lazy and don't know much of anything about real estate and flipping. I just know that I'd screw myself and be stuck with lemons! (Thanks though!)


    It is not for everyone. We do 90% of the work and it takes up a lot of free time when do buy a house to flip. Father in law got us started over 20 years ago. Had some where we broke even and made us want to quit. Then there was a couple of diamonds in the rough that we made a killing on. One example. We bought a shore house on the water for 250,000 cash with my brother in law. We did all the repair work ourselves, used it for seven years and sold it at the height of the market for 1.2 million. We were going to keep it and make a duplex, but the city would not give us a variance for two driveways that were needed. It was in a pie shape. Our latest rental we bought in 2012 for 124,099 and have it on the market for 299,000 with about 30 thousand in rehab cost. It can get scary, but well worth the shot. Gotta find the right seller in the right market and then find the right buyer in the right market. It is a waiting game sometimes. Oakie
  • mogley98mogley98 Member Posts: 18,297 ✭✭✭✭
    edited November -1
    Colt SAA and Pythons seemed to have been a good investment!
    Why don't we go to school and work on the weekends and take the week off!
  • MIKE WISKEYMIKE WISKEY Member, Moderator Posts: 9,961 ******
    edited November -1
    "Right now, the most easily understood investments are probably quality stocks that give dividends."............as above, get a 'good' stock broker (mine is Edward Jones), they get paid on each 'trade' but it isn't much plus a small yearly fee ($30 for me). Most quality utility stocks pay abou 5% dividends and if placed in a roth account this is tax free income. if you don't need the income right now the dividends can be re-invested free and you get compounding as well. if you need cash quickly you can sell all or part and have the $$$ within a week.
  • GuvamintCheeseGuvamintCheese Member Posts: 38,932
    edited November -1
    quote:Originally posted by Don McManus
    quote:Originally posted by GuvamintCheese
    Shotguns!

    How many investments can you name that virtually guarantee a sizable return on your money while offering the added bonus of pride of ownership? Buying antique automobiles might be one, and collecting fine art is certainly another, but if you didn't say gun collecting, you missed one of the surest bets around. But first, what is a gun collector?

    http://www.outdoorlife.com/articles/guns/shotguns/2007/09/three-rules-shotguns-investments


    I have done quite well collecting firearms and to a lessor degree, ammunition.

    If I sold out today, that is.

    I am a little concerned that those who will appreciate a well-maintained Krag, 1903, Garand or M1 Carbine, as examples may no longer be around when I get to the point of selling.

    Yep I agree. That's why the article pushes "investors" towards the timeless double bbl shotgun. Future collectors may not want lever guns or single shots but it seems the double shotgun may be timeless.
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