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Thread: Diversifying accounts

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    #1

    Diversifying accounts

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    I'll hopefully be getting steady job in December and I'm trying to figure out how to spread the money. Currently I have a checking account with overdraft protection, and 2 savings accounts at different banks. Neither savings accumulates much interest. One is going to be for emergencies and the other just general. I'm thinking of getting a USAA account (mom is a veteran) but what other investments would be smart to look into?
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    Certificates of Deposit (CDs) have higher yield rates than interest bearing savings accounts. They are a pretty 'safe' investment.
    I would also look into a 401(k) at your new job.
    It also depends if you are looking for a short term or longer term investment.

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    Quote Originally Posted by skp View Post
    Certificates of Deposit (CDs) have higher yield rates than interest bearing savings accounts. They are a pretty 'safe' investment.
    I would also look into a 401(k) at your new job.
    It also depends if you are looking for a short term or longer term investment.
    I did have a CD before. I'll have to look at the interest rates because they haven't been great the past couple of years.I'm looking for a mix of both. I definitely want to be prepared for retirement and generally squirreling money away.
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    #4
    Many banks offer Financial Consultants to help you invest your money. Often times these investments are not FDIC insured. They tend to have the highest gains, but the most risk.

    CDs are not that great anymore. Most are 2% or less, and the 2% is actually considered really good right now, which is awful. To be honest, I would suggest looking into IRAs.
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    I agree that what investment (CD, money market, stock or bond mutual fund, etc.) and account (IRA, Roth IRA, TSP, etc.) you pick should be linked to your goal (from a time perspective). The stuff you have is short-term (cash investments that you own in non-retirement accounts). If you're wanting to set aside some money for retirement I think a Roth IRA (account) invested in a target-retirement fund (investment) would be worth considering.

    First, the Roth IRA part has to do with how the account is treated for tax purposes. I think the best way to put it is that a Roth IRA isn't an investment, it's an account in which you put investments. Hopefully that makes sense. If you contribute to a Roth IRA this year, there is no tax benefit for your income tax return today. However, the account is tax-deferred (you pay no taxes on the investment income or gains) and when you pull money out in retirement (at age 59 1/2 after having had the account for at least 5 years) both what you put in plus all the growth comes out TAX-FREE. Another nice thing about the Roth is that you can pull out your contributions at anytime without taxes or penalties.

    As far as the investment within the Roth, you could be very conservative and do something like a CD or you could try something that has more upside potential, but also comes with downside--you could lose some or all of your money. I think that if you are just getting started a target retirement fund might be a reasonable option. Normally, you pick the fund with the date that corresponds with your retirement date, but if you want to be more conservative, pick a fund with a date 10 or 20 years before your retirement date. If you do this, your investment will be weighted more heavily towards bonds (which are more conservative and less volatile than stocks).

    If that's not clear let me know. Here are some links to USAA information on both the Roth IRA and our Target Retirement Funds (most fund families offer them).
    J.J. Montanaro is a CERTIFIED FINANCIAL PLANNER practicioner with USAA Financial Planning Services one of the USAA family of companies.
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    #6
    Maximize your pre-tax and tax deferred opportunities. Roth ira's, etc. if you have children, maybe look into college funds, etc.
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    #7
    the one thing about CD's even when the rates are low, is it locks up your money- so if you do a 2,500 dollar CD for 1 year. you can't touch it for that year, you'll earn a little interest and then after the 1 year if you don't NEED it, roll it over for another year, or live large and do a 5 year CD.

    ROTH IRA's are a great way to invest in your retirement- they are easy to understand and easy to use. ( you can have this in addition to a 401K)

    Money markets - well right now are not that great either, but do earn a little better interest then a savings account.

    Mutual Funds- a great way to let someone else play with your money, you decide on the risk from low, moderate, high, and the fund manager works to get you the best funds.

    IMO- the best plan is to have at least 3-6 months in an emergency fund. this is to help cover you if you lose your job need major car repairs ect.
    also have another savings account- this is for Christmas, planned vacations, ect.
    CD's at least 1 new CD a year, or a CD roll over
    and a ROTH IRA.

    now your wondering where in the heck do you get that kind of cash--- you don't do it all at once.
    Emergency fund first
    then ROTH/401K
    then general savings
    then CD's or other long term savings

    in a few years you will be pretty set for your future.

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