Thoughts on what I should do with excess savings.

[ViShawn]

So I want to keep $10,000 in savings at all times just for emergencies or hard times. I pay my credit card and bills every month. I want that money in savings to not be touched.

So I am depositing that money still into my savings and getting that interest. But I don't think I should keep all that money liquid.

I have a 401K I contribute to and a HSA account I'm investing with, so I'm thinking maybe I should put that money into stocks or an IRA. But I don't think if I put 300-400 in an IRA it would mean much.

Maybe I'm off but should I go that route?

 

[Macallik86]

Just want to preface this by saying I'm not a financial advisor...

IMO, your monthly expenses have to be reasonably large for you to keep $10,000 liquid.

I only keep enough money for rent/cash purchases/credit card bills in my Checking/Savings account. Everything else goes to the Trading account or (eventually) the Roth IRA. In my experience, it takes 3-5 days to close a position and transfer the money from your brokerage account to your banking account. Never had an emergency that couldn't wait a week personally...

The benefit of the Roth IRA is that you can withdraw contributions whenever you want without penalty so I max it out annually but it is always there as emergency fund if need be. So basically, just invest in some Target Date Mutual Funds and forget about it. It is important to remember that you can only withdraw your contributions without penalty. If you put $1,000 in there, you can always withdraw $1,000 without problem, but if your $1,000 turned into $1,400 and try to withdraw $1,400 then $400 of the $1,400 will get taxed and penalized heavily.

Another good thing about Roth IRA as an emergency fund is that if you do take money out, you have 60 days to 're-contribute' the money you removed. If you do that, it is like the money never left. If you don't get it back in time, then IIRC you just lose the ability to put the money back in without it counting against your annual max contribution limit.

 

[4-Rin]

It depends on what your goals are. I used to keep $10K then realized I don't need to have that much liquid at all times. I took $6K and used it to buy stock, now I keep at least $4K liquid.

What are your interest rates looking like? These banks aren't paying interest unless it's an online bank.

 

[ViShawn]

@4-Rin I'm getting about 1.05% interest rate on my savings account right now.

Just want to preface this by saying I'm not a financial advisor...

IMO, your monthly expenses have to be reasonably large for you to keep $10,000 liquid.

I only keep enough money for rent/cash purchases/credit card bills in my Checking/Savings account. Everything else goes to the Trading account or (eventually) the Roth IRA. In my experience, it takes 3-5 days to close a position and transfer the money from your brokerage account to your banking account. Never had an emergency that couldn't wait a week personally...

The benefit of the Roth IRA is that you can withdraw contributions whenever you want without penalty so I max it out annually but it is always there as emergency fund if need be. So basically, just invest in some Target Date Mutual Funds and forget about it. It is important to remember that you can only withdraw your contributions without penalty. If you put $1,000 in there, you can always withdraw $1,000 without problem, but if your $1,000 turned into $1,400 and try to withdraw $1,400 then $400 of the $1,400 will get taxed and penalized heavily.

Another good thing about Roth IRA as an emergency fund is that if you do take money out, you have 60 days to 're-contribute' the money you removed. If you do that, it is like the money never left. If you don't get it back in time, then IIRC you just lose the ability to put the money back in without it counting against your annual max contribution limit.

Definitely something for me to chew on. I forgot about the 60 day period I can re contribute'. Hmm..

Can you do that with a traditional IRA? I think I will be in the same tax bracket as I am in now when I retire.

As far as expenses I just thought that a number like that would be good for 3 - 6 months of expenses should something happen or an emergency.

 

[Truefan31]

So I want to keep $10,000 in savings at all times just for emergencies or hard times. I pay my credit card and bills every month. I want that money in savings to not be touched.

So I am depositing that money still into my savings and getting that interest. But I don't think I should keep all that money liquid.

I have a 401K I contribute to and a HSA account I'm investing with, so I'm thinking maybe I should put that money into stocks or an IRA. But I don't think if I put 300-400 in an IRA it would mean much.

Maybe I'm off but should I go that route?

imo you should keep about a 3-6 month emergency fund liquid at all times, whatever that number may be. keep it in a online account like ally or I use a credit union. It's just for that though.

Are there any debts you need to pay off? Car loans/Student loans/etc? if not great. if you do i'd pay those off asap.

Once there are you maxing out available retirement funds like your 401k? It's in your benefit, especially if your employer gives a percentage match. I max out my roth 401k (tax free growth).

If you're there, look into doing a roth ira. I don't know your income but a roth ira is a great way to start investing. Again tax free growth.

 

[ViShawn]

imo you should keep about a 3-6 month emergency fund liquid at all times, whatever that number may be. keep it in a online account like ally or I use a credit union. It's just for that though.

Are there any debts you need to pay off? Car loans/Student loans/etc? if not great. if you do i'd pay those off asap.

Once there are you maxing out available retirement funds like your 401k? It's in your benefit, especially if your employer gives a percentage match. I max out my roth 401k (tax free growth).

If you're there, look into doing a roth ira. I don't know your income but a roth ira is a great way to start investing. Again tax free growth.

I have no debt and pay my credit cards in full every month. I'm maxing out my 401K. I think ROTH IRA or IRA is my next step.

 

[Truefan31]

I have no debt and pay my credit cards in full every month. I'm maxing out my 401K. I think ROTH IRA or IRA is my next step.

that's wusup. yeah def do a roth ira. i don't know your income but if you make less than 117000 agi (184000 married) you're good. Even if you make over that you can do a backdoor roth ira from a traditional ira.

 

[ViShawn]

that's wusup. yeah def do a roth ira. i don't know your income but if you make less than 117000 agi (184000 married) you're good. Even if you make over that you can do a backdoor roth ira from a traditional ira.

Last year I made $109,000. I'm probably going to stay over six figures being in technology so I'm leaning IRA due to that.

 

[Truefan31]

Last year I made $109,000. I'm probably going to stay over six figures being in technology so I'm leaning IRA due to that.

either way it's all good. I prefer having a roth ira for the tax free growth though. Do a regular ira, then every year put 5500 into a roth ira.

If you go past that point then really the world is at your fingertips. Can do things like real estate and/or capital investments. I got some no load mutual funds doing pretty well, currently saving for possible real estate investments.

 

[The Coochie Assassin]

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[ViShawn]

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[The Coochie Assassin]

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[BaldingSoHard]

But I don't think if I put 300-400 in an IRA it would mean much.

Do that shyt, breh.

Unless you're talking like... 300-400 total? I'm talking make a monthly contribution to your IRA. Do that shyt.

 

[ViShawn]

Do that shyt, breh.

Unless you're talking like... 300-400 total? I'm talking make a monthly contribution to your IRA. Do that shyt.