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hazeleyes33
LIF Adult
Member since 5/05 13060 total posts
Name:
Ginger
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Another DUMB question about money!!
Is it better to put more money in a 4.5% interest savings account than a 401K or IRA?
Is the main reason for not putting as much in savings is that you have to pay NOW instead of later on?
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Posted 10/26/07 4:45 PM  |
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DRMom
Two in Blue
Member since 5/05 20223 total posts
Name:
Melissa
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Re: Another DUMB question about money!!
They are totally different. IRA and 401 K reduces your income so you pay less taxes(and don't pay taxes on the $$ either)
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| Posted 10/26/07 4:51 PM |
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Blu-ize
Plan B is Now Plan A
Member since 7/05 32475 total posts
Name:
Susan
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Re: Another DUMB question about money!!
you will pay taxes on the interest a regular savings account accrues. You can draw on it at any time without penalty. If you put your money in a tax deferred account like a 401k you don't pay taxes until you draw on it and are of retirement age and by that time you will be in a lower tax bracket.
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| Posted 10/26/07 4:54 PM |
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ali120206
2 Boys
Member since 7/06 17795 total posts
Name:
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Re: Another DUMB question about money!!
It depends on how liquid you need your money to be. They are two different types of savings instruments.
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| Posted 10/26/07 4:55 PM |
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hazeleyes33
LIF Adult
Member since 5/05 13060 total posts
Name:
Ginger
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Re: Another DUMB question about money!!
Posted by Blu-ize
you will pay taxes on the interest a regular savings account accrues. You can draw on it at any time without penalty. If you put your money in a tax deferred account like a 401k you don't pay taxes until you draw on it and are of retirement age and by that time you will be in a lower tax bracket.
I guess because we don't have much of an emergency fund, I am thinking to put a majority of our money in the savings account to have something liquid if we need it. I will have to look over my finances again and figure this all out. Thanks.
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| Posted 10/26/07 4:55 PM |
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CookiePuss
Cake from Outer Space!
Member since 5/05 14021 total posts
Name:
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Re: Another DUMB question about money!!
Posted by hazeleyes33
Is it better to put more money in a 4.5% interest savings account than a 401K or IRA?
Is the main reason for not putting as much in savings is that you have to pay NOW instead of later on?
I'm sorry I keep answering your questions, I hope you don't mind.
It really depends what the money is earmarked for. If you are trying to establish an emergancy fund, then putting that earmarked money in a retirement plan is not a good idea.
If you are talking about retirement savings, you should never have retirement money in a non-qualified account unless you have exhausted every option by maxing out your contributions.
Plus, you need to earn more the 4.5% on your retirement money to outpace inflation and taxes.
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| Posted 10/26/07 4:56 PM |
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hazeleyes33
LIF Adult
Member since 5/05 13060 total posts
Name:
Ginger
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Re: Another DUMB question about money!!
Posted by shamrock124
Posted by hazeleyes33
Is it better to put more money in a 4.5% interest savings account than a 401K or IRA?
Is the main reason for not putting as much in savings is that you have to pay NOW instead of later on?
I'm sorry I keep answering your questions, I hope you don't mind.
It really depends what the money is earmarked for. If you are trying to establish an emergancy fund, then putting that earmarked money in a retirement plan is not a good idea.
If you are talking about retirement savings, you should never have retirement money in a non-qualified account unless you have exhausted every option by maxing out your contributions.
Plus, you need to earn more the 4.5% on your retirement money to outpace inflation and taxes.
No problem at all!! The more advice the better!!!
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| Posted 10/26/07 4:57 PM |
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Blu-ize
Plan B is Now Plan A
Member since 7/05 32475 total posts
Name:
Susan
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Re: Another DUMB question about money!!
as a point of reference, we have money in a 5% account, a brokerage account earning an avoerage of 12% and an IRA and a 401k.
The bank account that earns 5% is part of the what if money along with the investments.
If I needed to liquidate, I could quickly..the account historically is earning 12% but can go up and down..that's just the average over 5 years. It's a risk and it's all due to market fluctuations, but if it's diversified, you should be able to ride out the ups and downs.
Make sure you have enough in case of an emergency before you allocate all of your money into retirement savings. Once that is established, then sock it away into retirement.
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| Posted 10/26/07 5:01 PM |
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hazeleyes33
LIF Adult
Member since 5/05 13060 total posts
Name:
Ginger
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Re: Another DUMB question about money!!
Posted by Blu-ize
as a point of reference, we have money in a 5% account, a brokerage account earning an avoerage of 12% and an IRA and a 401k.
The bank account that earns 5% is part of the what if money along with the investments.
If I needed to liquidate, I could quickly..the account historically is earning 12% but can go up and down..that's just the average over 5 years. It's a risk and it's all due to market fluctuations, but if it's diversified, you should be able to ride out the ups and downs.
Make sure you have enough in case of an emergency before you allocate all of your money into retirement savings. Once that is established, then sock it away into retirement.
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| Posted 10/26/07 6:21 PM |
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hazeleyes33
LIF Adult
Member since 5/05 13060 total posts
Name:
Ginger
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Re: Another DUMB question about money!!
Posted by hazeleyes33
Posted by Blu-ize
as a point of reference, we have money in a 5% account, a brokerage account earning an avoerage of 12% and an IRA and a 401k.
The bank account that earns 5% is part of the what if money along with the investments.
If I needed to liquidate, I could quickly..the account historically is earning 12% but can go up and down..that's just the average over 5 years. It's a risk and it's all due to market fluctuations, but if it's diversified, you should be able to ride out the ups and downs.
Make sure you have enough in case of an emergency before you allocate all of your money into retirement savings. Once that is established, then sock it away into retirement.
Thanks so much!!
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| Posted 10/26/07 6:22 PM |
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GoldenRod
10 years on LIF!
Member since 11/06 26792 total posts
Name:
Shawn
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Re: Another DUMB question about money!!
Also, if your company is matching (or partially matching) 401k funds, make sure you at least go up to the limit they match. They are giving you free money, so you might was well take it!
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| Posted 10/28/07 3:59 PM |
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CkGm
They get so big, so fast :(
Member since 5/05 13848 total posts
Name:
Christine
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Re: Another DUMB question about money!!
Posted by hazeleyes33
Posted by Blu-ize
you will pay taxes on the interest a regular savings account accrues. You can draw on it at any time without penalty. If you put your money in a tax deferred account like a 401k you don't pay taxes until you draw on it and are of retirement age and by that time you will be in a lower tax bracket.
I guess because we don't have much of an emergency fund, I am thinking to put a majority of our money in the savings account to have something liquid if we need it. I will have to look over my finances again and figure this all out. Thanks.
I would try for a minimum of 3 months expenses in your emergency fund and try to save even a little bit for retirement at the same time. Once you reached the 3 month goal, you could add more to your retirement accounts. If you have an employer who matches what YOU put in your 410K you are crazy not to do the maximum you can. Even if they don't saving for retirement is an essential move.
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| Posted 10/28/07 4:04 PM |
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