Still in search of investment options...

**Broken Arrow** · 01-26-2008, 06:44 PM

Hehe, you want to know something crazy? For a second there, I thought you were my ex-wife.

And here I was actually excited that she may have finally seen the light and want to get her finances straightened out.... Oh well, but I digress....

What is the $14k CD for? Where you stick it really depends on the purpose of this money. For example, is it your emergency fund? If so, I recommend to stick it in a high yield savings account earning between 4-5% interest.

If you haven't done so already, I would look into your 403(b) portfolio to ensure that you have proper asset allocation. But if the return is just due to current market conditions, I would just ride it out. Or, if you wish, please post the details of that portfolio and we can make some recommendations to help you rebalance it.

125k in student loan isn't anything to sneeze at... but what is the interest rate? If you tweak your earnings enough-- such as through the 403(b)-- you may also be able to deduct the student loan interest. You'll want to double check that, but if it's possible, I highly recommend to do so.

Finally, an IRA is only a tax shelter, and your choice of investments are only limited by the options available through your investment brokerage. It's quite common to have mutual funds in your IRA, but some brokerages will also offer stocks, bonds, and commodities. It's not a recommendation to steer you away from mutual funds, but it's just an example for illustration purposes.

Perhaps you mean tax-advantaged accounts versus taxable? Whenever possible, I say go with tax-advantaged shelters first. Only when you have a specific need would you want to resort to a taxable account.

You know, besides your age, you're kind of a dead ringer for my ex-wife.

You're probably not, but just in case you are, you have my personal email. Please don't hesitate to call or email me, and let's sit down and work out your finances. Yeah, we may have personal issues between us but that doesn't mean I won't help you, seeing as how it affects the kids as well. I promise it's a straight up, honest offer... and you should know that I'm good for it. Assuming that you are indeed my ex-wife that is.

**jIM_Ohio** · 01-27-2008, 09:21 AM

Originally posted by docstudent View Post

Hey People,

I am still seeking ways to maximize my money making potential. I have $14, 130 in a 4-month high yield CD earning 4.6%. The account matures in early May and I am in need of a better product to earn more money. In addition, I have $14,300 in a 403(b) account, so I am considering either to hault investing in it, because it is only earning 3% and I do not believe it is going to go any higher, what do you suggest? Lastly, I have about $34,000 in my STRS account (teacher's retirement account). Emergency fund: $5,000

On the other hand, I have a substanial student loan debt in the total of a $125,000+, which I must begin repayment in May of '08. I have $0 in Credit Card debt, which I do not see increasing over the course of the year.

Here are my stats, what can you suggest to maxmize my potential to retire by the age of 55.

Age:31
Salary: $66,000 (Monthly take home salary $3,650)
Rent: $1177, Car: $399, Insurance: $156, Misc: $350, Savings Plan: $600

Should I open up an IRA account or a Mutual Fund? I greatly appreciate any input to strengthen my economic growth potential.

$3650 take home, is this before or after pension and 403 (b) contributions?

I would make sure the 403 (b) and pension are funded. Can you invest the 403(b) more aggressively?

I don't see a good investment picture here, you need to improve this part of overall financial picture.

The $600 savings per month, what is this put towards?

What are the rates and terms of the 120k in student loan debt?

My thoughts, put about $300/month now to pay off student loan debt. My guess is this is accruing interest, so may as well start now to end it sooner.

The EF of $5000- what is this invested in? I see $1750 of monthly expenses listed (but no utilities or groceries?). I would suggest the $5000 be increased slightly (to 3 months expenses).

Any cash based investment should earn between 3-4.5% annually. EF or CDs.

I saw no mention of an IRA, I would suggest considering putting 4k into an IRA for 2007 and 5k into an IRA for 2008. If you are eligble for a Roth IRA, that is probably the best choice. Invest the IRA in something with an equity bias, where long term returns are between 8-10% expected.

**docstudent** · 01-27-2008, 11:20 AM

I take home about $3,650 after I contribute $300 to my 403(b), and $430 to my STRS account. The 403(B) account is currently fixed a 3% and I have no input as to where the money is invested. The first year, the 403(b) account earned 5%, and after that is has been locked at 3%, which is the minimum amount that I could earn. Therefore, should I increase my monthly contribution at such a low rate? Should I simply invest in a Mutual Fund to expand my investment options.

My emergency fund is in a traditional saving account, which is earning about 2%, but I might have to access the money, so I did not want it in a restrictive account. I know the overall financial picture is not that strong, that's why I am seeking the input of this forum. What should my next step be, the loan payment should total around $750 to $800 a month for 30 years. Hopefully- my income will increase by 20G upon graduation. Should I use the $600 I am saving monthly to fund a mutual fund or pay down my student loan (the interest rate is under 6.5%).

**jIM_Ohio** · 01-27-2008, 12:04 PM

Originally posted by docstudent View Post

I take home about $3,650 after I contribute $300 to my 403(b), and $430 to my STRS account. The 403(B) account is currently fixed a 3% and I have no input as to where the money is invested. The first year, the 403(b) account earned 5%, and after that is has been locked at 3%, which is the minimum amount that I could earn. Therefore, should I increase my monthly contribution at such a low rate? Should I simply invest in a Mutual Fund to expand my investment options.

My emergency fund is in a traditional saving account, which is earning about 2%, but I might have to access the money, so I did not want it in a restrictive account. I know the overall financial picture is not that strong, that's why I am seeking the input of this forum. What should my next step be, the loan payment should total around $750 to $800 a month for 30 years. Hopefully- my income will increase by 20G upon graduation. Should I use the $600 I am saving monthly to fund a mutual fund or pay down my student loan (the interest rate is under 6.5%).

How does the 403b work specifically? If it like a 401k where you have investment choices? Is the 3% your contribution or your employers contribution? If the emplyer is sending in 3%, OK, but if employer is not sending in any money, you may want to look elsewhere.

I would follow up any conclusion you make here with the HR and benefits department at your employer, in the follow up, ask questions as to what your emploters fees are for the program. If the options seem limited, take some initiative and ask a place like T Ropwe Price what their fees are to set up a 403b, and then take this back to the HR department.

Cash investments for retirement purposes do not make much sense.

What are the choices?

As for the student loans. Even under 6.5%, if they are accruing interest, it is not a good deal, the accrued interest might make effective rate for the loans around 8-10%. Accrued interest means they are billing you interest, and adding this amount onto the loan balance. Then that interest accrues more interest and the compounding effect is working against you while in school. If you can make the minimum interest payments now and still save, that is best situation.

Paying off student loans over 30 years is a bad idea- I might suggest looking to decrease term of payment to 10 or 15 years.

As fort the 20k salary increase at graduation... no idea what field you are in, but my advice would be to learn to live on the 36k you are taking home now. When you get the 20k raise, have a more complete plan ready:

send 10k to student loans (pays off in 12 years?)
send 5k to an IRA
increase spending by 5k per year

for example

Once the debt is paid off, you should find getting a loan for a house to be easier, and because you are setting aside some money for retirment now, you should also see the retirement nest egg growing bigger.

With the 12k CDs you have now, I would suggest:

5k into a 2008 Roth IRA
3k to increase current EF to around 3-4 months expenses
4k back into CDs or another investment.

Still in search of investment options...