Posted: 10/17/2025 11:49:13 AM EDT
[Last Edit: 10-8DoWork][Edited]
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Looking for some advice on what to do next... Up front, I'm maxing out 401k contributions, almost debt free aside from a house. I thought about just hammering down on the house but the rate is 3.2% so seems like I could do better elsewhere. What do I do next? Roth IRA? Put some money into the stock market? I'm clueless here and honestly never thought I'd be at this point. I started putting a few bucks each check into some random stocks but I know I need a plan before I get too invested lol. I'm not one to watch the market and buy/sell frequently, so keep that in mind. Lastly, I don't have a huge lump sum to drop into the market. It's going to be a gradual thing. |
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Originally Posted By 10-8DoWork: Up front, I'm maxing out 401k contributions, almost debt free aside from a house. I thought about just hammering down on the house but the rate is 3.2% so seems like I could do better elsewhere. What do I do next? Roth IRA? Put some money into the stock market? I'm clueless here and honestly never thought I'd be at this point. I started putting a few bucks each check into some random stocks but I know I need a plan before I get too invested lol. I'm not one to watch the market and buy/sell frequently, so keep that in mind. Lastly, I don't have a huge lump sum to drop into the market. It's going to be a gradual thing. Roth IRA is never a wrong answer and, since you can withdraw your principal anytime without penalty it's a great alternative to paying off your mortgage early. What to invest in via your roth ira is an entirely different thread. Assuming you're a decade or more from retiring then a low or zero fee total market, sp500, or nasdaq index fund is the safe/easy button. Not checking the markets every day is the best thing when you're more than a decade away from retiring - invest and let compounding work for you. If you're interested in a local financial planner PM me and I'll give you his name. |
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How old are you? Have you calculated how much you want at retirement? Are you on track with that? Kids? Will they go to college? What are your financial goals? |
Ludwig Boltzmann, who spent much of his life studying statistical mechanics, died in 1906, by his own hand, Paul Bhranfest, carrying on the work, died similarly in 1933, Now it is our turn to study statistical mechanics...
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Originally Posted By WWolfe: How old are you? 36 Have you calculated how much you want at retirement? No idea Are you on track with that? See previous Kids? Yes Will they go to college? Not sure, but I have accounts for each of them that I drop money into to cover first car and a good start at school. Still got a while for both of those things. I'm looking at a 529 or money market account instead of letting that cash sit in the low interest savings. Them going to school is an unknown so that's why I haven't started a 529. I need to read the fine print on those like if you can still use it on certifications or trades. What are your financial goals? Keep living like I do now. It's not extravagant, don't buy fancy cars or vacations. We do a lot of traveling, but it's always on the cheap through camping, or BnB. Point is, we are pretty damn frugal in general so lifestyle cost isn't that crazy to begin with. Another point is our house is pretty cheap and will be paid off well before retirement so that's not going to be a concern. I guess I need to start crunching numbers and estimate some monthly/yearly expenses huh? |
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Awesome! 1) do some of the various "what do I need to retire" calculators and make sure you are on track. 2) I'd fund those 529 plans. We didn't do that until later (kids were in high school!) and I lost out on probably $75k worth of "free" growth of that money. Sounds like you are on the right track, though! |
Ludwig Boltzmann, who spent much of his life studying statistical mechanics, died in 1906, by his own hand, Paul Bhranfest, carrying on the work, died similarly in 1933, Now it is our turn to study statistical mechanics...
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Originally Posted By WWolfe: Awesome! 1) do some of the various "what do I need to retire" calculators and make sure you are on track. 2) I'd fund those 529 plans. We didn't do that until later (kids were in high school!) and I lost out on probably $75k worth of "free" growth of that money. Sounds like you are on the right track, though! Thank you for the response and questions. Those got the gears turning! |
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Originally Posted By Morgan321: Don't pay off the mortgage early. Roth IRA is never a wrong answer and, since you can withdraw your principal anytime without penalty it's a great alternative to paying off your mortgage early. What to invest in via your roth ira is an entirely different thread. Assuming you're a decade or more from retiring then a low or zero fee total market, sp500, or nasdaq index fund is the safe/easy button. Not checking the markets every day is the best thing when you're more than a decade away from retiring - invest and let compounding work for you. If you're interested in a local financial planner PM me and I'll give you his name. Thank you. I may take you up on that. We just got a new retirement provider that supposedly has free access to planning. Let me explore that first to see if it's legit. |
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Originally Posted By 10-8DoWork: ... I have accounts for each of them that I drop money into to cover first car and a good start at school. I'm looking at a 529 or money market account instead of letting that cash sit in the low interest savings. I guess I need to start crunching numbers and estimate some monthly/yearly expenses huh? Additionally, many 529 plans limit your investment options and have fees. Consider a UTMA account rather than a 529. In Alabama a UTMA account transfers from the adult to the recipient when they turn 19. Assuming your kid is responsible, they can withdraw money once they are 19 for school and, if they file their own tax return and aren't your dependent, they will be in the 0% long term capital gains bracket and pay zero taxes on the money. The money is theirs free and clear so it can be used for anything (education, car, house down payment, etc). The only downside is that the money is theirs and they can use it on hookers and blow if they want to. Start tracking spending now. Spending is more important than income for financial planning. Put everything into a few broad categories like housing, cars, groceries, kid stuff, pet expenses, vacations, and discretionary or something like that. Keep it simple so that you continue doing it. Even if you don't use the information right away it will make your future planning much more accurate. Originally Posted By 10-8DoWork: Thank you. I may take you up on that. We just got a new retirement provider that supposedly has free access to planning. Let me explore that first to see if it's legit. Since you're wanting to help your kids out, look into a roth IRA for minors. It's custodial - you control it now and it transfers to your kid when they turn 18. A balance of $20k when they turn 20 years old left alone at 8% return becomes roughly $640k when they turn 60 and can access the money 100% tax-free. |
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I would pick a 529 for the kids over a UTMA any day. The guy above who said he lost out on 75K? I believe it. My kid is 16 and I have been saving in a 529 for her since she was born. I have put about 55K in and it has made 48K in tax free earnings so far invested in an S&P 500 index fund. That's pretty hard to beat. |
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1. Pay off all toxic debt (credit cards, high interest rates). 2. NEVER carry a balance on a credit card month to month. 3. Build an emergency fund of 6-12 months of *expenses* and keep it liquid, such as in a High Yield Savings Account (HYSA) or Money Market Fund (MMF) 4. Contribute to your 401k up to the company match maximum. 5. Contribute to an HSA (if offered/eligible) up to the maximum allowed. 6. If your 401k plan allows, contribute to a Mega Backdoor Roth. https://thecollegeinvestor.com/17561/understanding-the-mega-backdoor-roth-ira 7. If you do not have access to a Mega Backdoor Roth through your 401k, contribute to a ROTH IRA (unless income ineligible, then use Backdoor Roth IRA method. https://thecollegeinvestor.com/38006/how-to-do-a-backdoor-roth-ira 8. Go back and finish contributing to the 401k plan, up to the maximum limit ($23,000 in 2024, plus $7500 for age 50+). 9. If offered a Company Stock plan (ESPP/ESOP) that gives you shares at a discount, AND you can sell immediately upon stock purchase, contribute the maximum amount to this program and sell each time. You should participate in this regardless of any choices or order of operations above. This runs in parallel to everything else. 10. Open a taxable brokerage account and begin investing here, and/or real estate, and/or side business. 11. Consider funding children's college in 529 plans or taxable brokerage account, or other state advantaged options. 12. Limit the amount of vehicle debt you carry, as vehicles can be one of the biggest barriers to building wealth. Between depreciation and interest, this can be a wealth evaporator. Invest all of these in a low fee Total US Equities Market index fund like VTI/VTSAX/FSKAX (if offered) or an S&P500 index fund like VOO/VFIAX/FXAIX, to start. DONT TOUCH it. Just be steady and don't change, be careful who you listen to, and don't make emotion-based moves into cash because what you just "know", likely is not so. Recommended reading: https://www.amazon.com/Simple-Path-Wealth-financial-independence/dp/1533667926 https://www.amazon.com/dp/1119847672?tag=arfcom00-20 https://www.amazon.com/Richest-Man-Babylon-Original-Classics/dp/B0C1J5ML66 https://www.amazon.com/The-Millionaire-Next-Door-audiobook/dp/B0000547HR |
| You can roll over unused funds from a 529 plan to a Roth IRA, thanks to the SECURE 2.0 Act, for the beneficiary of the 529 account. To qualify, the 529 plan must have been open for at least 15 years, the rolled-over funds must have been contributed at least five years before the rollover, and the rollover is limited to a lifetime maximum of $35,000 and the annual Roth IRA contribution limit. The beneficiary must also have earned income for the year of the rollover. |
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Originally Posted By zephyr: I would pick a 529 for the kids over a UTMA any day. I have put about 55K in and it has made 48K in tax free earnings so far invested in an S&P 500 index fund. That's pretty hard to beat. Why? Assuming they are used for education, the tax treatment of both are identical if you use them as I described. UTMA have unlimited investment options, many 529 have limited options. UTMA money can be used for anything, 529 can only be used for education unless you pay the penalty. That $100k you’ve saved up is now locked away. If your kid doesn’t use it for college your only option to access the money is to pay taxes on the profits plus the 10% penalty. (You can “roll it over” into a 529 for another kid if you have more than one, but the problem remains) You can roll $35k of into a Roth IRA for your kid, but that leaves $65k subject to taxes and penalty. In summary, a 529 offers nothing better than a UTMA (assuming your kid is responsible) and a UTMA is far more flexible and is never subject to any penalties. So yes, you can beat a 529 and it’s pretty easy to do so. |
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Originally Posted By sunburn: I think now you can roll any unused 529 funds into a Roth IRA up to $35k Covered above already - but there are "gotchya's". Roll over only for the beneficiary of the account. 529 plan must have been open for at least 15 years The rolled-over funds must have been contributed at least five years before the rollover. Limited to a lifetime maximum of $35,000 Limited to the normal annual Roth IRA contribution limits (currently $7000 per year) The beneficiary must also have earned income for the year of the rollover, equal to or exceeding the amount rolled over. That's quite a few strings. |
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Originally Posted By zephyr: Lots of reasons, I control the funds, I can deduct my contributions from my state tax, the earnings are tax free (my kid is going to college and likely grad school), FAFSA calc, etc. You can withdraw the utma funds, deposit them in a 529, then immediately withdraw from the 529. You get the utma flexibility with the 529 state tax deduction. With the UTMA you deduct the principal and profits, with the 529 you only get to deduct the principal. Utma is tax free for any use unless your kid is making over $80k when the utma becomes theirs. Fafsa assets include both 529 and utma. Don’t fall into the trap where you think a 529 is awesome just because everybody says it is. Think critically and objectively for yourself. |
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OP if you are interested in a 529 or UTMA here is a good comparison to make an informed decision for your scenario: https://www.savingforcollege.com/article/differences-between-ugma-and-utma-accounts-and-529-plans |