Retirement savings without 401K option

[BurleyGirl]

I'd like your opinions on how we should now save our money for retirement. My DH lost his 22-year job last year, thankfully getting another job within a month, but at a 40% salary cut. However, his new job does not offer any type of retirement/401K/pension plan. (He previous employer had a generous matching program.)
I'm trying to figure out what's the best thing to do with the monthly amount we set aside for retirement (sadly A LOT less than it was, but thankfully there is still some to set aside).
Should I just go the old-fashioned route of putting it into a savings account, which will not gain us anything. Should I find some safe stocks and invest it, which is a gamble. Just not sure what to do
And here's the scary part...it's so easy to spend it on things that arise (like the $2800 unexpected recent shower leak repair, which is almost exactly what we set aside last year...tempting to take that $2600 we'd set aside (and which I haven't done anything with yet) to cover the repairs instead of going into savings, which would basically be the same thing!
We're very disciplined and I'm a planner, but I'm struggling with this one...

 

[tvguy]

An IRA would be what he needs. You need to consult a financial planner to find out whether a traditional or ROTH IRA is best for you, and what investment options you have.

 

[TwoMisfits]

Actually, I would split the sum into IRAs for BOTH of you (likely in to 2 different funds - don't both invest in the 500 index, as an example)...whether it's a traditional or ROTH IRA would depend on your current tax bracket (and your expected future tax bracket). Also, depending how low his income became, you may also qualify for the saver's tax credit (The saver’s credit can be claimed by married couples filing jointly with incomes up to $59,000 in 2013 - that's "free" money not to leave on the table, but it requires you save some money...

 

[BurleyGirl]

IRA, OK. I'll look into the different scenarios for us.

Would I contribute to the same one on a monthly basis, or hold each month's in savings and then make one contribution on an annual basis?

Thanks for your answers!!

 

[Iowajes]

We contribute to our roth IRAs on a monthly basis. It is an automatic withdraw from our account. My adviser recommends this over annual because 1) if it comes out every month, you DO IT, the money doesn't accidentally get spent somewhere else and 2) you buy at the prices that ebb and flow, some might be higher some might be lower. If you buy annually, then you are more at risk of the market.

We also have some mutual funds, and I put money into them every few months when I have some. Since savings accounts get nothing now, I use these for more short term savings. The taxes are high when you withdraw, but the interest we've earned on an investment made in April is already paying for our annual vacation. A savings account would NOT have done that.

 

[ICF]

it's almost always better to invest monthly vs one lump sum....helps you to take advantage of dollar cost avg.

We have our Roth IRA's thru Vanguard & Sharebuilder.

 

[TwoMisfits]

Definitely monthly...too much temptation to spend the savings if you hold for one lump sum (unless your taking a tax refund or something and putting it right in)...

 

[BurleyGirl]

Alright, monthly it is. Now to get this plan set in motion...

Thanks, everyone, for your input. I see clearer now...

 

[RitaE]

Your best option is likely going to be a Roth IRA using low cost Index Exchange Traded Funds. Exactly what is going to depend on what else you have your old 401k investments. It's likely that you will eventually want to roll the old 401k over into an IRA.

I set my sons up with Charles Schwab because I like their range of low cost, commission free ETF and also their service. We've also been with Fidelity for years as a brokerage and have always found their customer service to be top notch.

 

[eliza61]

Ok, so first you have to get some goals. TVguy is right on, spend the dough on a good Financial planner. some things to thing about

1) how old are you two? how long are you going to work? Please do not stick them in a savings account if you still have 25 years to work. You need some interest. Make your money make money.

2) What else is going on? are you putting every thing in an IRA without an emergency fund? that could be a recipe for disaster because when some thing happens (and it always will) will you have to tap the IRA with all it's penalties and taxes to get buy.

 

[BurleyGirl]

eliza61, thank you for your advice: we are close to 50 and the reality is that we will probably have to work until at least 62 (at which time the house will be paid for), and do have an emergency fund in place. We do still have a 15 year old to put through college (with some set aside for that purpose, depending on what school he chooses). I hesitate to spend money for a financial planner at this point (especially when we are making so much less money and therefore have less money to spend on a financial planner).

I think the monthly contribution to an IRA (or IRAs) makes sense for us. (I just have to figure out how to open and contribute to one monthly...can that be an automatic draft type thing, or an actual monthly action on my part...)

 

[lisaross]

i would check out boglehead.com -- GREAT site - they will help you out..

I suggest opening a Vanguard Account - perhaps a Target Date Retirement Roth account....

follow the bogleheads...let us know what they recommend for you..

and good luck to your husband with his new job

 

[clh2]

IRA, OK. I'll look into the different scenarios for us.

Would I contribute to the same one on a monthly basis, or hold each month's in savings and then make one contribution on an annual basis?

Thanks for your answers!!

Definitely do it monthly, there are huge benefits to dollar-cost averaging.

I would also recommend seeing a financial planner, because getting some really sound financial advice on what you should do with his current 401K from the former-employer. Obviously - you want to roll-it over, but they will be able to provide some assistance into recommendations, based on your ages and your risk tolerance.

 

[CarlisleMom]

My DH also works for a employer that does not offer a 401K. We both do Roth-IRA's. I would definitely talk to a financial planner. Ours does not cost us anything. he gets his comission and that is it.

When you are over 50 the amount you can put into the Roth-IRA is higher that if your are younger. We always max on a monthly basis.

We have skipped vacations, pinched pennies when needed to make this amount. DD's 525 college fund is also funded monthly - not alot of $. She can always borrow for college - we MUST HAVE the money for retirement.

 

[manning]

It may cost you a couple hundred bucks for a financial planner but it may be the best thing to do.

Look for one who charges a flat fee.

 

[danygirl]

You can invest thru an IRA, much better than a saving account .

 

[Kingdome8]

Yeah self directed Ira is the best. You can pick any investment option.
Traditional or Roth is up to you. We have one of each.
I use fidelity and merril edge

 

[Angeni11]

As others have said you definately should talk to a financial planner as it is well worth it.

There are some rules about rolling over a 401k to a IRA rollover (I did one several years ago to Fidelity). Due to the way it can be taxed contributing to it was not worth it so we just keep an eye on it and adjust the investments yearly if needed. I would never have known that if I hadn't talked to our financial planner. I already have another IRA (Roth) but he said I would be better off opening a new one that we conribute to rather then invest in the rollover.

 

[BurleyGirl]

We did take care of moving the 401K (I don't know what exactly, but our taxes (filed with a CPA) were not drastically affected, so I guess we did it correctly), so I think we'd only need a financial planner for this going-forward IRA quandry. I had no idea that one would be affordable...I mean $200-$400 is a fair amount...as a few years ago, we met with a guy (maybe he was more than a "financial planner") who wanted to charge us $3900/year, so that's why when you guys started saying "financial planner," I kinda shut down!

I will do some inquiring in my neighborhood...

Thanks for all your responses/advice.

 

[eliza61]

We did take care of moving the 401K (I don't know what exactly, but our taxes (filed with a CPA) were not drastically affected, so I guess we did it correctly), so I think we'd only need a financial planner for this going-forward IRA quandry. I had no idea that one would be affordable...I mean $200-$400 is a fair amount...as a few years ago, we met with a guy (maybe he was more than a "financial planner") who wanted to charge us $3900/year, so that's why when you guys started saying "financial planner," I kinda shut down!

I will do some inquiring in my neighborhood...

Thanks for all your responses/advice.

Depends on what he's doing for you. A good financial planner is not going to help you with 1 simple quandary. You say you "guess" you did it correctly, what does that mean?

This is just my opinion. A great financial planner will look at your entire financial situation and then make a plan for your financial life and it will not be a 30 minute meeting. My guy, whom I think is great worked with me for almost 2 years!!! and my life is not that exciting. He looked over every thing and I mean absolutely every thing. He answered a gabillion questions. Now that I'm sort of in maintenance mode, we get together about 4-5 times a year, we discuss the best ways to pay for college, how to get more money for college, how my investments are doing. am I on track for retiring. When I purchase my new house, he ran the figures on how to get the best mortgage, what fees I would run into and host of other things (even went to closing with me).

Now yes, I could probably do all that myself but truthfully I don't have the time.

Now we on the Long term insurance quest (I've got a post) and he's helping me research that.

LOL, I think a good financial planner is right up there with a good hairdresser. yeah I could do my hair at home but it wouldn't look half as good.