Investing outside of 401k or Roth IRA

**dczech09** · 07-31-2016, 06:23 PM

First of all, I would not say that you are a "free-loader." It sounds like your parents are initiating this, and you aren't necessarily doing this because you're unable to make ends meet on your own. Besides, I am sure your parents will put you to work so that you earn your keep

Anyway, you have a very interesting opportunity ahead of you. I think maxing the 401k and IRA would be very good ideas, if only while you are living there.

As for investing outside of the 401k and IRA, I think you should consider the HSA. You will need to make sure that you health insurance coverage qualifies ($1,300 annual deductible, $6,550 maximum out-of-pocket for individuals). Assuming that your coverage qualifies, then you can invest up to $3,350 in your HSA. If you employer contributes anything, this will lower the amount that you can contribute. The great thing about the HSA is that it carries over (unlike the FSA), and grows tax-deferred. You can use any of the money in the HSA for qualified medical expenses (including deductibles) without penalty.

If your health insurance plan does not qualify you for an HSA, then you will need to consider other options such as a taxable brokerage account or a variable annuity. Both have their draw-backs. A taxable brokerage account will open you up to tax liability on any earnings, while the variable annuity may have some high expenses.

Unfortunately, after the 401k and IRA you are really limited on investment options.

**Jbone** · 07-31-2016, 06:48 PM

You are right. They are the ones initiating the "help" That's just how they are and they both know how important saving money is. I think they are just trying to help me "get ahead" while they still can.

Anyways I will definitely look into the HSA. As far as a taxable brokerage account or variable annuity, I presume even with all the fees this would out perform a traditional savings account or CDs.

**TexasHusker** · 07-31-2016, 06:51 PM

If you're soon to be running short on cash, I think I'd be putting every spare dollar under my mattress rather than in some retirement lockbox that you might not even live to see.

Birds need to leave the nest and fly on their own. You're all grown up. You don't need to be living with the folks after you are grown - it doesn't really matter if they want you to - you are grown. Use your earnings and your savings to fly on your own. You'll feel a lot better about yourself even if you can't save a nickel for so-called "retirement".

**Jbone** · 07-31-2016, 07:22 PM

Originally posted by TexasHusker View Post

If you're soon to be running short on cash, I think I'd be putting every spare dollar under my mattress rather than in some retirement lockbox that you might not even live to see.

Birds need to leave the nest and fly on their own. You're all grown up. You don't need to be living with the folks after you are grown - it doesn't really matter if they want you to - you are grown. Use your earnings and your savings to fly on your own. You'll feel a lot better about yourself even if you can't save a nickel for so-called "retirement".

First of all who stated anything that I can't save for my retirement on my own? And who stated that I am short for cash? It's obvious I'm doing just fine on my own. Since my previous thread I think I'm actually doing quite well. I managed to double my contributions to my 401k. All while still paying all my bills on time and maintaining no balances over my credit cards. Even with a credit score of 815+ that I don't think many people at my age can claim they have achieved. I may not be able to save 35k/yr currently but the last time I checked very few people find themselves to be in a position to.

Me having to sell my house has NOTHING to do with me not being able to provide for myself. I am playing the hand that I am dealt with and there are just some things in life that happen that are beyond your control. I am truly sorry that you feel that way and that my parents are willing to help out while I save up extra cash during this transition in my life. For me this probably would be a one in a life time opportunity to substantially get ahead even if it is just for a year or so. You sir really are a trip. Please don't post in my thread if you have nothing constructive to add to the discussion.

**TexasHusker** · 07-31-2016, 07:29 PM

Originally posted by Jbone View Post

First of all who stated anything that I can't save for my retirement on my own? And who stated that I am short for cash? It's obvious I'm doing just fine on my own. Since my previous thread I think I'm actually doing quite well. I managed to double my contributions to my 401k. All while still paying all my bills on time and maintaining no balances over my credit cards. Even with a credit score of 815+ that I don't think many people at my age can claim they have achieved. I may not be able to save 35k/yr currently but the last time I checked very few people find themselves to be in a position to.

Me having to sell my house has NOTHING to do with me not being able to provide for myself. I am playing the hand that I am dealt with and there are just some things in life that happen that are beyond your control. I am truly sorry that you feel that way and that my parents are willing to help out while I save up extra cash during this transition in my life. For me this probably would be a one in a life time opportunity to substantially get ahead even if it is just for a year or so. You sir really are a trip. Please don't post in my thread if you have nothing constructive to add to the discussion.

Constructive meaning something to support your line of thinking ? You're the one that uttered "free loader", not me. You're 32. Moving back in with mom and dad --- sheesh. That's free loading defined.

Continue as you were, but refrain from asking feedback if you're offended at any that counters your own intent.

**sv2007** · 07-31-2016, 08:41 PM

I wrote a calculator that performs tax deferred savings vs taxable and the difference is very noticeable for SP500 investment (and SP500 isn't super dividend heavy too).

So unless you need that money, I'd put it into 401k/roth IRA. I'm retired and I still max out my IRA; it just makes financial sense (assuming when I reach 70 y tax rate is going to be lower and if not, then it's a good thing too right?; plus the tax deferment on income get compounded which is a no-questions asked good thing)

**sv2007** · 07-31-2016, 09:26 PM

Originally posted by Jbone View Post

My parents strongly have been urging me to live with them for a year? Maybe longer (rent and 100% bill free) .

I'm assuming that your parents are happy about the arrangement; if not, then don't do it. Now, how about you? Do you like living with your parnets?

We bought a place near us for my parents (they live there 3-4 months a year). They think it is terribly wasteful but we assured them that having them nearby is a blessing. BUT, I'm almost certain that we'd not be happy living with them in the same house.

For me, the money saved is not worth living with my parents, and I love my parents. But they nag so much. What's money if it can't be used to make you happy; an important concept to remember.

**Jluke** · 07-31-2016, 10:16 PM

Originally posted by Jbone View Post

I will end up having to sell my house and depending on what the house sells at I may net 30-40k profit.

However this gives me the opportunity to max my 401k and Roth IRA out at least while I�m living with them.

Currently I make 50k/yr not including any bonuses and I'm 32. Currently contributing 12% to my 401k and sporadically contributing to my Roth. Only put in $500 so far this year.

Trying to make sense of the situation that requires you to sell your house. Is it b/c you are moving in with your parents that you have to sell, or are you forced to sell your house and as a result you need to move in with your parents?

Either way, the math looks like this:
50k (gross) - 18k (401k) -5.5k (Roth) = 26.5k... that doesn't take into account taxes and health insurance. So you'll save 10k or so outside of retirement?

You don't seem to have a solid plan for how long you'll live with them.

What happens on the back end - will you buy a house again?

If you're only going to live with them for 1-2 years, you may not want to invest all of your extra (non-retirement) money in a taxable account b/c the time horizon for investing needs to be longer to ensure you don't lose money.

Also, if it is only 1-2 years, you may not want to max out the 401k or Roth; contribute something to each, just hoard as much cash as possible.

if you want to invest - research bogleheads.

**snafu** · 08-01-2016, 07:14 AM

I was trying to imagine having a much loved, well launched son returning here to his parental home as his principal residence. I see it fraught with issues and unmet expectations. Given work and cost of selling and moving, I hope you'll consider moving your stuff to storage and renting your house. Selling and buying in under 5 years is usually an expensive, non deductible operation.

I suggest an informal contract with parents outlining what you'll do in exchange for free room, board, laundry etc. How will you manage social life, sports activities, holiday, vacations/travel, illnesses, breakage and all challenges life throws both you and parents?

Sounds harsh but do you anticipate inheriting this parental home sometime in the future?

I too have a problem getting my head around timeframe. Any investment in retirement program presumes long term. Rule of thumb, non retirement investment needs a 5 year window of opportunity. If you bought a Vanguard program or ETFs from a discounter, the fees are tiny. With sums mentioned, I doubt you would break even with a full on, wealth primed, taxable brokerage service of individual stocks.
...just non edited thoughts

**disneysteve** · 08-01-2016, 08:11 AM

If you are being forced to sell your home (divorce, perhaps?) and your parents have offered to let you live there for a few months until you get another place, I can understand that. I don't understand why they would be paying all of your bills, though. You earn a good income. It doesn't sound like you're having a financial crisis at all. I think that's where some of the negative comments are coming from.

What would I do? I would pay my own bills and get a new place to live as soon as I possibly could.

Is the plan to buy a new house? If so, I'd be socking money away for the 20% down payment, moving expenses, furniture, etc.

**Jbone** · 08-01-2016, 09:20 AM

I'll be having to sell because of a divorce yes. As far as my parents paying the bills I wasn't too thrilled about them even considering it until they offered their explanation.

I understand why some are having negative comments. Everyone is entitled to their own opinion. But assuming things is definitely where in my opinion the line is crossed. My dad worked 52 years not because he had to work 52 years but because he wanted to give me a chance to live a better life than he ever had a chance to. Isn't that what most parents strive for? The best for their kids?

In my parents mind either way they would be leaving me a sizable inheritance. They feel that moving and divorce can and will be expensive and this would be their way of helping. My dad bluntly put it as you'd be getting my money at some point. What you do with it is your choice. However I worked 15 extra years so you wouldn't have to work as hard as I did.

What am I supposed to say to him? Thanks dad but no thanks? Sorry you worked the extra 15 years when you shouldn't have. I suppose I'll get hit for being left an inheritance too.

**disneysteve** · 08-01-2016, 09:28 AM

It always makes a lot more sense when people come here and post the full story first.

So you're getting divorced and, as a result, are forced to sell the house as part of the settlement. Then there are likely other costs involved like legal fees and such.

What is your plan as to where you will live going forward? Do you think you'll rent for a while? Or might you be looking to buy another place on your own? The answer to that will play into what you should do with spare money at this point.

If your parents want to "pre-pay" your inheritance, nothing wrong with that. I am curious if you have any siblings, though. If so, make sure they are all getting equal treatment to avoid problems later on.

**TexasHusker** · 08-01-2016, 03:26 PM

Originally posted by Jbone View Post

I understand why some are having negative comments. Everyone is entitled to their own opinion. But assuming things is definitely where in my opinion the line is crossed.

With all of the information I have, I still wouldn't be caught dead moving back in with pops at age 32. The fact that you have admitted that you have plenty of means to live on your own makes the idea even more inappropriate.

Sorry if that's negative. You asked.

I guess it's a pride thing for me. When me and my wife got married in 1989, she was still in college and I was a fresh graduate making $16,500 a year. My take home was $963 and our rent was $350 plus electricity. I had a 10 year old car with almost 200K on it. Her folks offered to pay the rest of her school and insisted on buying her a new car "so that she has something safe to drive." I basically said "Hell no we will make it just fine thank you."

I've never asked a dime from either of our sets of parents, unlike our in-law brothers and sisters - several of which are STILL on the nipple 25 years later. I take pride in that fact - we did it on our own and while I would have LOVED to have had a shiny brand new car and free college for my wife, I'm glad I politely declined.

We paid for her college just fine and she drives a shiny new Range Rover now. It worked.

**scfr** · 08-01-2016, 03:54 PM

Yes, by all means max out the 401(k) contributions - assuming that you like your investment options - and max out the Roth.

Beyond that, I think you are in a period of emotional flux, and so you probably don't want to be making any drastic decisions. You don't know how long you'll stay with your parents. You don't know if you'll be buying a house or condo when/if you move out. Lots of unknowns. My recommendation is that you just put the extra in a savings account (don't settle for less than 1%) and revisit this question in 3 months or 6 months or 1 year ... however long it takes you to regain your equilibrium.

And as far as the negative comments on this thread - wow! Do people not realize that there is more than "my way" of doing things? In some cultures it is the norm for multi generations to live together under one roof. In fact, there are places in the world where the urge to move out and live independently might be seen as a character flaw. Yeah, I'm one of the "I moved out at 18 and supported myself" boasters but I'd never malign another family that chose to live differently if that was what everyone wanted.

Investing outside of 401k or Roth IRA