Need Suggestion For My Current Situation

[firehawkocean]

Hello everyone,

I need some advice on my current situation and how/what I should proceed to invest my money.

Household income is $15,221.77 per month (net). However, this is not considered 'earned income' and therefore does not qualify for an IRA. The income is fairly reliable. However, I wouldn't count on it forever. A fee only adviser had recommended a Jefferson National Flat rate annuity a couple years ago for my retirement. However, I am skeptical of tying my money up.

I have $102,141.23 in liquid cash.

I have two homes paid off. One is a rental (in California) that is probably bringing in $1,000/month after all taxes & expenses. It is worth about $443,197.

The other home I live in (Texas) is worth about $250,000.

I own two vehicles outright. One worth about 30,000 and the other about 14,000.

I have $3953.45 in a 529 plan for my kids.

And I have $414,220 in taxable Vanguard mutual funds account.

I own about 25,000 in precious metals.

I have plenty of life insurance on myself.

I am 29, wife is 28, and a 4 year old and 2 year old.

Any suggestions?

[disneysteve]

Household income is $15,221.77 per month (net). However, this is not considered 'earned income' and therefore does not qualify for an IRA. The income is fairly reliable.

Can you elaborate here? What is your actual earned income from employment? Do you both work or just one of you? Or neither of you?

Flat rate annuity a couple years ago for my retirement.

If an adviser recommended an annuity for a 29 year old, you should run out of that office as fast as you can.

I have $102,141.23 in liquid cash.

What are your monthly expenses?

I have two homes paid off. One is a rental (in California) that is probably bringing in $1,000/month after all taxes & expenses. It is worth about $443,197.

That's less than a 3% return. Is it really worth the hassle of being a long distance landlord? You could make a lot more money selling the house and investing the proceeds. Also, that's an awfully specific "estimate" of the home's value. How did you arrive at that number?

I have $3953.45 in a 529 plan for my kids.

How much are you contributing to those accounts each month?

I have plenty of life insurance on myself.

And how about on your wife?

Any suggestions?

I'm not really sure what your question is.

[firehawkocean]

Can you elaborate here? What is your actual earned income from employment? Do you both work or just one of you? Or neither of you?

Neither of us work!

If an adviser recommended an annuity for a 29 year old, you should run out of that office as fast as you can.

I did

What are your monthly expenses?

About $5,000/month.

That's less than a 3% return. Is it really worth the hassle of being a long distance landlord? You could make a lot more money selling the house and investing the proceeds. Also, that's an awfully specific "estimate" of the home's value. How did you arrive at that number?

Just an estimate from an agent.

How much are you contributing to those accounts each month?

Not contributing right now. Market is overvalued.

And how about on your wife?

Wife has no life insurance.

I'm not really sure what your question is.

question is regarding some suggestions as to what type of investments (best for taxes).

[disneysteve]

So you have a monthly surplus of about $10,000 but aren't eligible for an tax-advantaged retirement accounts because all income is unearned.

I would say you want to focus on relatively tax-efficient funds like index funds since they have low turnover and low capital gains distributions.

I would keep at least 30K liquid as an emergency fund.

I would start contributing to the 529s. Just because you think the market is overvalued is no reason not to be saving for your kids' education. You've got 14 and 16 years for that money to grow. What the market is doing today really doesn't matter. And you could choose more conservative investments in the 529 if you don't want a large equity exposure.

I would get life insurance on your wife. Think about all of the things she does for you and your family and what it would cost to hire someone to do those tasks for you if she were to die. Term coverage is dirt cheap at your age. It makes no sense not to have it.

What are you long-term plans regarding employment? Do the two of you plan to never work? You said that you wouldn't count on the current income lasting forever. I'm not sure what that means. And as much as I would love to retire, I'm not 29. Do you really want to do nothing your entire life? That's more a philosophical question than a financial one I suppose.

[cardtrick]

Hello everyone,

I need some advice on my current situation and how/what I should proceed to invest my money.

Household income is $15,221.77 per month (net). However, this is not considered 'earned income' and therefore does not qualify for an IRA. The income is fairly reliable. However, I wouldn't count on it forever. A fee only adviser had recommended a Jefferson National Flat rate annuity a couple years ago for my retirement. However, I am skeptical of tying my money up.

I have $102,141.23 in liquid cash.

I have two homes paid off. One is a rental (in California) that is probably bringing in $1,000/month after all taxes & expenses. It is worth about $443,197.

The other home I live in (Texas) is worth about $250,000.

I own two vehicles outright. One worth about 30,000 and the other about 14,000.

I have $3953.45 in a 529 plan for my kids.

And I have $414,220 in taxable Vanguard mutual funds account.

I own about 25,000 in precious metals.

I have plenty of life insurance on myself.

I am 29, wife is 28, and a 4 year old and 2 year old.

Any suggestions?

Curious... what do you do that nets you over $15K a month? Job or a business?

If I were in your situation, I'd get rid of the CA home. You're making $12,000 on a $443,000 investment. That's a 2.7% return assuming home prices stay flat. And besides, a home is not as liquid as index funds. Just keep adding to your Vanguard account.

[MonkeyMama]

@firehawk - this is a good question to ask on the boglehead forums. I in particular recommend because they are investment-knowledgeable, tax-knowledgeable, and tend to have many people in your shoes. If nothing else, a lot of good ideas for tax-efficient investing strategies.

One thing I would consider is finding employment with more of a tax-deferred compensation element. (Meaning a generous retirement plan, instead of being paid straight salary - which is heavily taxed by itself). This may not be useful advice depending on the industry you are in. But sometimes compensation structure varies greatly between employers (depending on who has better tax counsel).

For the long run you will probably want to look into trusts and more advanced tax and estate advice. For the short run, I think bogleheads would serve you very well.

[firehawkocean]

So you have a monthly surplus of about $10,000 but aren't eligible for an tax-advantaged retirement accounts because all income is unearned.

I would say you want to focus on relatively tax-efficient funds like index funds since they have low turnover and low capital gains distributions.

I would keep at least 30K liquid as an emergency fund.

I would start contributing to the 529s. Just because you think the market is overvalued is no reason not to be saving for your kids' education. You've got 14 and 16 years for that money to grow. What the market is doing today really doesn't matter. And you could choose more conservative investments in the 529 if you don't want a large equity exposure.

I would get life insurance on your wife. Think about all of the things she does for you and your family and what it would cost to hire someone to do those tasks for you if she were to die. Term coverage is dirt cheap at your age. It makes no sense not to have it.

What are you long-term plans regarding employment? Do the two of you plan to never work? You said that you wouldn't count on the current income lasting forever. I'm not sure what that means. And as much as I would love to retire, I'm not 29. Do you really want to do nothing your entire life? That's more a philosophical question than a financial one I suppose.

Nothing with my life? Ha! I live life to the fullest. We homeschool our kids and give them experiences most kids will never have. I also have a small business that I am trying to grow. However, I won't work a 9 to 5 just to work. I work with end goals in mind. In my case, I can make/keep more of my money by investing my time into, well, investments. Hell, I make 85K from 2010 to 2012 on my investments and then took that $ and bought a house outright.

I work, dont get it twisted! Oh, and the $ comes from my share in a tribal casino (I am Native). And I have my Bachelors in Business from University of Redlands and Masters in Psychology from Brandman University in Orange, CA.

[disneysteve]

Nothing with my life? Ha! I live life to the fullest. We homeschool our kids and give them experiences most kids will never have. I also have a small business that I am trying to grow. However, I won't work a 9 to 5 just to work. I work with end goals in mind. In my case, I can make/keep more of my money by investing my time into, well, investments. Hell, I make 85K from 2010 to 2012 on my investments and then took that $ and bought a house outright.

I work, dont get it twisted!

My apologies. That didn't come out as intended at all. Very sorry for the comment. I wish I could generate 85K/year without going to work every day. I'd quit in a minute.

Is your small business generating any income yet? If so, you can use that money to fund a Roth or a SEP-IRA to get some tax-advantaged retirement savings going.

[firehawkocean]

My apologies. That didn't come out as intended at all. Very sorry for the comment. I wish I could generate 85K/year without going to work every day. I'd quit in a minute.

Is your small business generating any income yet? If so, you can use that money to fund a Roth or a SEP-IRA to get some tax-advantaged retirement savings going.

No prob Disney Steve. Your input is always appreciated (I listened to one of your recommendations in 2010 when I posted a question and have done quite well). I will look into the Roth/SEP-IRA. Thank again!

[LivingAlmostLarge]

How long is the money going to last? How long has it lasted now and how much have you gotten and spent? Will your kids get it? Why don't your forsee it lasting?

[firehawkocean]

How long is the money going to last? How long has it lasted now and how much have you gotten and spent? Will your kids get it? Why don't your forsee it lasting?

I don't forsee it last because of what is called tribal corruption via disenrollments:

http://tribalcorruption.com/Disenrollments.htm

I would have to run some numbers to see how much total I have gotten altogether.

I would NOT bet on my kids getting anywhere near that amount in by the time they are adults.

I live a pretty frugal lifestyle. Drive a 07 Camry and a '10 Pilot. Most expensive watch I own is a Gshock