What kind of savings/inventment account? Advice

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volk06

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So with all this talk about savings accounts lately it got me thinking about the measly 0.15% my savings account is earning. I would like to start taking some of my savings and putting it into an account that has higher earning interest. I'm only 23 and have my simple IRA through work contributing 9% (6% + 3% company match), so my retirement plan is in the works and I will be uping this percentage after my next pay raise in a month. I'm sitting comfortable with what I'm earning and have not needed to dip into my savings for quite a while. The initial transfer from savings to the new account would be ~5k. I want the account to have higher earning, lower risk, but yet be able to liquidate it in an emergency if I needed it. I thought about doing a ROTH IRA but I cant access it as easily in case of emergency and I already have a traditional IRA started. Maybe a CD is my best bet, but those are only earning .30-1.0% depending on length and amount. Does anyone have any suggestions or advice?
 
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With Schwab you can open an investment account and buy/sell any of their Schwab brand ETFs for free as long as you hold them for 30 days. I'm sure other investment companies have similar systems. You can buy something like a whole market or SP 500 index ETF, and it's value will rise and fall with the market but you'll also get dividends worth more than what you are making on your savings account. And with no transaction costs all that money is yours, so you can really start something like this with as little as 100 dollars (transactions need to be more than 100). This is what I do.
 
Create an account on treasurydirect.gov and buy paperless inflation bonds (I bonds). They're at 3.06% right now. The fixed rate is laughable(currently 0%), but the inflation rate changes May 1st and November 1st and currently is 3.06%. You have to hold them a year though before selling, which can also be done through that website- and selling before 5 years is a 3 months interest penalty. Safe place to put cash and still beat the lousy 0.15% that a bank is giving out.
 
http://www.bankofthewichitas.com/ Rewards checking - you have to use your credit/debit card 10 times per month but you get 2.5% (up to $10k) (was 5.25% when I first signed up a couple years ago for the redneck bank card) I just use this card for all my small purchases like fast food, etc and I've made much more interest than anywhere else. All online, I live in CA and have no issues. Not to mention the free ATM fees - I've gotten $8 ATM fees from Las Vegas credited back - can't beat never having to search for a compatible free ATM.
 
I would pay off debt first. The money that you save in interest will probably beat any market right now (especially if you have a mortgage), if no debt then trade in ETFs like bepperb does or start a Roth IRA. Roth are so much better since they grow tax free. If you did a good job of saving and the markets also do well, you will probably be in a lower tax bracket now than when you retire.
 
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Originally Posted By: SVTCobra
I would pay off debt first. The money that you save in interest will probably any market right now (especially if you have a mortgage), if not then trade in ETFs like bepperb does or start a Roth IRA. Roth are so much better since they grow tax free. If you did a good job of saving and the markets also do well, you will probably be in a lower tax bracket now than when you retire.
The only debt I have is student loans and my truck. I will be paying those off ahead of schedule and will be putting more towards them after I feel I have a good financial base with a good amount in savings and this new account, incase of an emergency. The truck is at 1.9% so I pay very little on interest there.
 
If you haven't, read up on the pros and cons of the traditional IRA vs Roth IRA because there are pros and cons to both. You can always withdraw early from your retirement, but they charge you fines/taxes, and there are certain conditions where you can withdraw without penalties, and some allow you to borrow money/take loans from your account. The best thing you have going for you is time, because you are young, there is more time for your money to grow. With your work, at least put in as much as possible to get the max matching your employer will give since it's free money, and I don't know about how your work retirement works but mine allows me to choose from different fund options/plans to put the money into. Put as much into your retirement as you can to take advantage of the tax deductions and allow it to grow until retirement.
 
Originally Posted By: wkcars
If you haven't, read up on the pros and cons of the traditional IRA vs Roth IRA because there are pros and cons to both. You can always withdraw early from your retirement, but they charge you fines/taxes, and there are certain conditions where you can withdraw without penalties, and some allow you to borrow money/take loans from your account. The best thing you have going for you is time, because you are young, there is more time for your money to grow. With your work, at least put in as much as possible to get the max matching your employer will give since it's free money, and I don't know about how your work retirement works but mine allows me to choose from different fund options/plans to put the money into. Put as much into your retirement as you can to take advantage of the tax deductions and allow it to grow until retirement.
I agree, my work only offers a traditional IRA, I would like a ROTH but they don't offer it. My employer matches.50% for 1% up to 3% and thats why Im contributing 6%. I had a few different plans to chose from and some that automatically adjust with my age to lower risk investments.
 
I'm in a similar situation. I'm 24 and just started saving for retirement after I graduated and got a job about 2 years ago. I place 6% into a company 401k to get the free company matching money. I then opened a Roth IRA with vanguard and setup auto monthly deposits into that account. I think it requred a 1K minimum intial deposit. I really like that the Roth IRA is all post tax money. (I just can't picture tax rates being lower when I retire in 40+ years...) I keep my "emergency" funds just in my credit unions savings account for now. I agree with the OP, hopefully we can find somewhere to place $5-10K for an emergency fund that earns more than .25% yet can still be easily accessed.
 
Everbank.com is a good place. Their Yield Pledge Checking pays ~1/2% on a 1500 balance. They also have some good metal based type accounts for longer term.
 
Originally Posted By: badger05
I'm in a similar situation. I'm 24 and just started saving for retirement after I graduated and got a job about 2 years ago. I place 6% into a company 401k to get the free company matching money. I then opened a Roth IRA with vanguard and setup auto monthly deposits into that account. I think it requred a 1K minimum intial deposit. I really like that the Roth IRA is all post tax money. (I just can't picture tax rates being lower when I retire in 40+ years...) I keep my "emergency" funds just in my credit unions savings account for now. I agree with the OP, hopefully we can find somewhere to place $5-10K for an emergency fund that earns more than .25% yet can still be easily accessed.
You and I are on the same track. I will be opening a vanguard roth IRA with in the next year as well, they seem have have some solid performing portfolios. It almost seems now days they are forcing you to put money into the market just to make some interest.
 
I use a Capital One online savings account earning 0.7% for my emergency fund and use Fidelity for my investments. I highly recommend the Capital One account, been real happy with it. If you have more than $10,000 in it you earn a quarterly 10% bonus on that 0.7% interest as well.
 
For starters.....I'd check locally for a credit union for your banking needs. Typically, credit unions have higher interest rates, particularly when it comes to savings accounts....It's funny, cause I got a Credit Union Savings, and a savings account with Chase bank, and I've gained more interest on the $1000 I've had at Space Coast Credit Union, than I have on the $2000 I have sitting in my Chase savings account..... really contemplating closing out the Chase account, and moving the savings over to SCCU.... I know the "big banks" try and scare us into thinking our funds aren't "insured" at a Credit Union....when in fact, that is FALSE. They are still insured, just in a different way by different means....likely insured in a lower amount than the "FDIC" that the big banks are insured up to.... Why not CDs? They seem to be very appealing.....or even savings bonds? Though, the latter can be kind of a hinder...the fact that you can't cash them in until maturity, which is typically 18-20 years....God bless my grandmother....she left me with a big stack of them.....got us one every birthday til she passed away when I was 13.....though some of them are "mature" and can be cashed....I was reading, and they still accrue interest up until 30 years from the issue date....so I figure I may as well just keep them as-is...for a rainy day....an "emergency fund" if you would.....say my engine/car were to blow up next week.....I could get another with the stack....and be back on the road..lol....or at least, a decent down payment to get in another vehicle smile The ones she got us kids were "EE" bonds....
 
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Originally Posted By: ahoier
For starters.....I'd check locally for a credit union for your banking needs. Typically, credit unions have higher interest rates, particularly when it comes to savings accounts....It's funny, cause I got a Credit Union Savings, and a savings account with Chase bank, and I've gained more interest on the $1000 I've had at Space Coast Credit Union, than I have on the $2000 I have sitting in my Chase savings account..... really contemplating closing out the Chase account, and moving the savings over to SCCU.... I know the "big banks" try and scare us into thinking our funds aren't "insured" at a Credit Union....when in fact, that is FALSE. They are still insured, just in a different way by different means....likely insured in a lower amount than the "FDIC" that the big banks are insured up to....
I do all of my banking at 2 local credit unions.
 
There are online banks that have money market and savings accounts returning 0.8-1%. They're more liquid than CDs If money is tight, my suggestion is to put your diposable income into the simple IRA first since it has the company match, then into a non-retirement savings/MM, then into an Traditional IRA or Roth IRA. The reason I put IRA last is because you cannot access the funds without penalty until you're old. You never know when your truck needs a new transmission or something dire happens. Later when your liquid savings account has plenty of money, then you can start contributing to the IRA/Roth IRA. But for now, build up the liquid savings account first!
 
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Originally Posted By: volk06
I would like to start taking some of my savings and putting it into an account that has higher earning interest.
Why? What are your goals? Is this a retirement fund? Strictly emergency cash? Given the questions that you're asking I'd seriously consider some sound (beyond a discussion forum) financial advice. Since you're in Iowa you have one of the premier financial planning companies available to you-the Wealth Enhancement Group. They can show you options that you didn't know you had available, both long and short term.
 
Why? To have my money making me more money while it's sitting in the bank. Right now it's not doing anything but just sitting there. This is not a retirement account. I just wanted some other options that could give me a higher yield while sitting around. I would like to be able to access it in extreme cases. I have enough of an emergency fund to pay 3 months expenses set a side so this would not likely need to be accessed
 
Originally Posted By: volk06
Why? To have my money making me more money while it's sitting in the bank. Right now it's not doing anything but just sitting there. This is not a retirement account. I just wanted some other options that could give me a higher yield while sitting around. I would like to be able to access it in extreme cases. I have enough of an emergency fund to pay 3 months expenses set a side so this would not likely need to be accessed
You said you had a car loan at 1.9%, pay that off. Every dollar extra that goes towards principal is making you 1.9% interest. Think of it as a reverse savings account and it is guaranteed to save you money whereas the market can make or lose money. If times get tough, quit making early payments.
 
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