Now with monetized Add On!
Another investing/ 401(k) post.
The question before us is, where do you stash the extra cash? Basic rule of thumb: Fund the 401(k), fund the Roth IRA, then put money into investment accounts. And here's a simple-minded but necessary tutorial about the best places for each of these three categories:
1. Put your most tax-inefficient funds in 401(k)s, 403bs, traditional IRAs and similar retirement accounts. When these are full…
2. Put your next most tax-inefficient funds in your Roth(s). When your Roths are full…
3. Put what's left into your taxable account.
4. ...[K]eep only tax-efficient funds in taxable accounts..
This is pretty basic, straight-forward stuff, but lots of people don't pay much attention and so louse up their investment mix. They stick index funds (tax efficient) into 401(k)s and actively managed funds (high turnover, low tax efficiency) into investment accounts.
Last point: We've had a bunch of people say they missed today's and yesterday's meetings, so to insure future attendance, we offer these:
Upcoming 401(k) Enrollment Meetings
Wed., May 12th -- Starz/Film Roman -- 2:30 p.m. -- Rm. 2037
Tues., May 18th -- Disney TVA (Sonora) -- 2 p.m. -- Rm. 1173
Tues., May 18th -- Disney Toons (Sonora) -- 3 p.m. -- Rm 2025
Thurs., May 20th -- Walt Disney Animation Studios (Southside building) 10 a.m. -- Rm 1300.
Add On: CBS has a useful article about stupid things people do with their 401(k)s:
... 5. Misusing Target-Date Funds
About a third of 401(k) participants invest in target-date funds (at some companies, these funds are the default option), but many don’t know how to use them. These accounts allocate assets based on the year you plan to retire and are meant to provide one-stop investing. Vanguard’s Target Retirement 2030 Fund (VTHRX), for instance, divides contributions among domestic stocks and bonds and international stocks in a ratio designed for someone retiring in 21 years (now 67 percent U.S. stocks, 16 percent bonds, 17 percent international stocks). But some employees invest in multiple target-date funds with different dates, defeating the purpose.
“I wouldn’t say it’s disastrous, but it just doesn’t make any sense,” says Seattle financial planner David Lamp ...