Tax deferred quandry, and other investing????

cuddlepooDecember 21, 2007

DH is 50, I'm 40. He makes a good living, but can't even contribute the max 401k that the IRS allows due to his companies plan of that requires a certain balance of higher and lower paid employees contributions. This year he'll be able to contribute about $11.5k. So he can't do the max, nor the $5k catch-up. On the other hand, I've been looking into IRAs for me, and apparently with his income I can contribute exactly zero (according to the Bank of America investment info). Not that I want to put all my eggs in one basket, but it shocks me how little we can do per his companies plan. Are there any other tax-deferred options for us? Just for info purposes, we will be over $200k together this year and the limits for married couples are what's limiting my options. I have a small bookkeeping business on my own, not incorporated, that will gross about $13k if that is any help.

Part two, I've been surfing the net trying to figure out how to invest my money in a relatively safe way, but make more than the rate of inflation. I'm stumped at this point. We did buy a rental house recently and thought we might buy one per year. Friends of ours (and my own mother!) have done well this way. But I have found I seriously hate being a landlord. The day we sell it will be the best day of my life. I just don't know what my next step should be.

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Well, if you can't contribute more to a 401K, you can go off into other investments. I'm thinking Roth IRA's. You never pay taxes on the Roth,even when you withdraw, but the money goes in after taxes.

You said you wanted to grow your money better than inflation, so maybe the next idea isn't for you, however it ads diversification to your portfolio. You can buy a municipal fund. It's like a mutual fund. You earn tax free money and that might be a good idea for you because of your tax bracket. Most of these are right around 3.5% return per month. I'm a big fan of municipals, mixing them with other investments types just to get a little less exposure to the stock market. It's so frustrating to take stock risks every year and not get much return. But as married folks, you are still under the reduced marriage penalty so getting the highest rate of return may work better. All this so much depends on your situation, risk tolerance, etc. But if the Dems get in to the White House, the marriage penalty may return. Something to keep an eye on.

As you age, it's recommended to reduce your stock market exposure. You might even consider CD's.

Hope this helps. At least it gives you a couple ideas to cogitate upon.

    Bookmark   January 2, 2008 at 3:27PM
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As a self employed person, you can start a SEP IRA or a Simple IRA for yourself. I am assuming that you do not have any employees. Talk to a financial advisor or possibly a bank about the pros and cons of the plans and how to open one.

    Bookmark   January 3, 2008 at 11:30PM
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