Brainless Investment

[DriveHard]

My bride and I are wise with our finances, but not that smart when it comes to investments. We have all our debt paid off except our house, which has a pretty low interest rate. I have a chunk of cash sitting in the bank above what we need for an emergency fund, and the interest rate is obviously a joke compared to what it could be earning somewhere else. Again, I am not all that savvy when it comes to investments. My bride and I both contribute the full legal amount to our 401k's, but that is all the real investing that we do. We are to the point we are paying every year on taxes, and it is getting worse. I am looking for a brainless investment to both increase the returns on cash we have laying around and lower our taxes we are paying every year.

Low risk
Not impossible to get the money back out if needed
Not paying big penalties if we need to get the money back out

I don't want to deal with properties or rentals or any of that stuff.

My first thought is gold, and my bride's first thought is to pay off the house.

Any advice would be great! I realize this is an oil site, and any advice will be taken with a grain of salt, and researched before I do anything. THANK YOU!

 

[skyactiv]

See a fiduciary financial advisor and don't listen to the people here.

 

[AZjeff]

Asking for financial advice gets your thread locked. Asking what others use just for ideas works better. I hope you get some ideas as I have some cash that should be working as well.

 

[twouvakind]

I am happy with a financial planner that uses Riskalyze. YMMV.

 

[The Critic]

I recommend checking the bogleheads forum for advice on this topic.

 

[99Saturn]

I am looking for a brainless investment to both increase the returns on cash we have laying around and lower our taxes we are paying every year.

Is the tax avoidance a must have to whatever you end up doing? Or nice to have? I don't see buying gold or paying down your mortgage as tax avoidance as an example so just wondering if that is key.

A ROTH IRA would be an option to avoid taxes on future growth. Withdrawals of contributions don't incur a penalty. You could pick a fund that is lower risk/lower reward.

HSA contributions if you have a HDHP already, but (in a pretty simplistic summary) money can only be withdrawn for medical spend without incurring a penalty before retirement.

 

[Leo99]

What do you mean my "paying every year on taxes"? Owing the IRS at tax time doesn't mean you're paying more or less taxes. It just means you didn't contribute enough during the year to cover yourself.

Everyone's risk tolerance is different when it comes to investments. Gold has been a relatively poor investment. It fluctuates and is the same price today and it was in 1980. Although gold is about 5x higher today than it was 20 years ago. The stock market in general (S&P 500) is 10x higher today than it was in 1980.

 

[JohnnyG]

You sound young. Two words, Roth IRA.

 

[levi]

See a fiduciary financial advisor and don't listen to the people here.

This.

Not that there couldn't be good advice gleaned from some on here.

But when you are not experienced with investments as you mention, how are you going to know what is good advice and what is not?

Fiduciary financial advisor. Very important. Look it up.

 

[double vanos]

Certainly not any kind of financial advisor but the seeking alpha app or seekingalpha.com has some pretty interesting reading

 

[BISCUT]

IMHO it is impossible to even begin providing anything sound except seeking professional help. In order to get legitimate answers, you could plot out and run an analysis on, what we'd need to know are particulars. Again, IMHO, age is the most important factor. As in, how much time do you have to grow your assets? Compounding interest is an investor's best friend....unless you are a politician and then it seems the magical unicorn guides windfall decisions to buy and sell over and over again in perpetuity.

 

[ecotourist]

Paying taxes is the cost of doing well financially.

It's never a good idea to make paying the smallest amount of taxes the only goal. My uncle kept all of his money (and it was a large amount) in a chequing account so there wouldn't be any interest to pay taxes on. Goal achieved, but at a cost.

But considering taxes in your investments is a sensible approach.

 

[The Critic]

You sound young. Two words, Roth IRA.

If the OP is in a position to contribute the full legal amount to their 401k's, it is unlikely that they would qualify for a Roth IRA.

 

[99Saturn]

If the OP is in a position to contribute the full legal amount to their 401k's, it is unlikely that they would qualify for a Roth IRA.

Backdoor ROTH IRA contribution could still be an option.

 

[The Critic]

Backdoor ROTH IRA contribution could still be an option.

Of course, but the keyword here is backdoor.

 

[JohnnyG]

Well then, regular IRA. You can have both 401k and an IRA can't you?

 

[99Saturn]

Well then, regular IRA. You can have both 401k and an IRA can't you?

You can have both. There's income limits for both Traditional and ROTH IRAs: 2022 limits.

But as of now it is legal to contribute after tax to an IRA (post tax money not in a ROTH) and then roll that into a ROTH IRA - in other words a backdoor ROTH IRA. If the person doing this has pre-tax holdings (ex. an Traditional IRA; rollover IRA from an old Traditional 401K) there are tax implications on regarding the pre-tax money.

Edit - And FWIW, completely possible to be contributing to a 401k in full and still eligible for a ROTH IRA without backdooring, all about cost of living in the area, and tradoffs people are making to save. Obviously we don't know one way or the other from the OP.

 

[JohnnyG]

You can have both. There's income limits for both Traditional and ROTH IRAs: 2022 limits.

But as of now it is legal to contribute after tax to an IRA (post tax money not in a ROTH) and then roll that into a ROTH IRA - in other words a backdoor ROTH IRA. If the person doing this has pre-tax holdings (ex. an Traditional IRA; rollover IRA from an old Traditional 401K) there are tax implications on regarding the pre-tax money.

Yeah, just looked it up. I see there are also income limits and limits on tax deductions. All of which tells me that an investment professional is the person to see. The IRA can be a liquid asset too I think, so at least there's that.

 

[redbone3]

Open an account with a discount broker. Buy ETF's based on major indices (SP500, NASDAQ 100, etc). You can get your money out in a matter of days. You don't pay any fees. The ETF's based on major indices have low operating costs.

 

[wings&wheels]

Let's see; economics undergrad, MBA and 25+ years in various finance exec positions and we have pro's do our planning....

Do your research anywhere but here, , find a reputable fiduciary firm, watch their fee/commissions structure and if someone tries to sell you something that sounds too good to be true or is a 'special opportunity just for my select clients'...run.