some financial questions, investing/saving

[SunRise]

1) The old adage, save 10% for retirement. Is that 10% of gross or net?

2) The 5000 dollar / year IRA maximum.  The first 5000 dollars goes into an IRA ... what do you do with the excess of money that you have allocated for retirement? A mutual fund? Stocks?

(I work in a small company, no 401, no retirement plan - just my own attempt at setting this up)

3) Emergency fund. So far I have this sitting in an emarket account. When I am ready, I want it moved  somewhere where it can earn more money. I suppose right now, there are not many options (cd's, emarket funds) due to lack of interest making accounts.  Any suggestions?

(This e-fund is meant to be used if I take a year off / or if I am forced into a year off. I have other cash for smaller emergencies (car fixing, house maintenace etc).)

4) I have a mutual fund that I recently stopped funding as the annual fees are highish and the initial deposit fee was 5% for each deposit.  Would you just leave the $$ in the fund and start a different one. Or would you transfer this money to a new fund. It is not an IRA and all the fees have been paid upfront so I wouldn't be charged anything for moving it BUT I would be charged a deposit fee for new mutual fund on money that has already incurred fees.  I doubt I will move it, I feel I will just "forget" about this account until I am older, but I am curious about advise on this.

Thanks for your input!

Sara

[TiredX2]

Originally Posted by SunRise 

1) The old adage, save 10% for retirement. Is that 10% of gross or net?

10% of gross.  That said, you need to look at what is right for you :)  Depending on your age, income, expenses, plans, etc... 10% might be way off from what you need.

Originally Posted by SunRise

2) The 5000 dollar / year IRA maximum. The first 5000 dollars goes into an IRA ... what do you do with the excess of money that you have allocated for retirement? A mutual fund? Stocks?

(I work in a small company, no 401, no retirement plan - just my own attempt at setting this up)

 

If you have a spouse, make sure they also have an IRA set up.  After that, your only choice is to invest outside of retirement accounts. Those investments (just like those within an IRA) can be anything--- stocks, bond, mutual funds, real estate, precious metals.  The only difference is that the investments within the IRA are more protected and have certain tax advantages. 

Remember to keep the big picture, as well.  I don't know where you are in life, but... do you own a home, do you want to, are you wanting to save for other large purchases, college...?

Originally Posted by SunRise

3) Emergency fund. So far I have this sitting in an emarket account. When I am ready, I want it moved somewhere where it can earn more money. I suppose right now, there are not many options (cd's, emarket funds) due to lack of interest making accounts. Any suggestions?

(This e-fund is meant to be used if I take a year off / or if I am forced into a year off. I have other cash for smaller emergencies (car fixing, house maintenace etc).)

IMO, that is dependent on your personal comfort levels AND your assessment of the possiblity of needing those.  Some people may feel safe with three months invested in mutual funds, others might need 12 months in cash or 24 months in metals, or...   Right now there aren't a lot of options (that I know of) that have safe, guaranteed returns.  Our emergency fund is just stashed in our ING account.

Originally Posted by SunRise

4) I have a mutual fund that I recently stopped funding as the annual fees are highish and the initial deposit fee was 5% for each deposit. Would you just leave the $$ in the fund and start a different one. Or would you transfer this money to a new fund. It is not an IRA and all the fees have been paid upfront so I wouldn't be charged anything for moving it BUT I would be charged a deposit fee for new mutual fund on money that has already incurred fees. I doubt I will move it, I feel I will just "forget" about this account until I am older, but I am curious about advise on this.

Since the annual fees are highish, I would encourage you to move it.  That fee is going to hit you every year.  Unless there is some pay off (and there aren't for more managed mutual funds, you get about the same return in many index funds) you might as well cut your losses while you can.  I know that is hard to do, but keep in mind that you are continuing to put money into this in the forms of fees you are faced to pay.

[JenRN]

My husband was laid off a few years ago (found a new job within a month, but it was a stressful time), so my comfort level is that I need near-immediate access to the money in my emergency fund. I'm not comfortable with CDs or anything like that for this money.

I went to a small, local bank. Several in my area offer high-interest checking accounts. It takes a little "effort" each month, but as long as I follow the rules I earn 3.5% (was 4% before the rates dropped). If I don't follow the rules that month, I make 1%. There is a cap of $50k, but my emergency fund is nowhere near that large.

I'm sure each bank is different, but to get the higher interest rate I had to sign up for e-statements, have at least one direct-deposit or auto-bill pay a month, and use the debit card 8 times. I always use this account to buy the piddly things, like when I forget my lunch at work and buy from the cafeteria or if I've done some major couponing at a drugstore and my total is $1-something. There are times at the end of the month when I haven't used it much, so I make sure to buy a thing of peanuts at the gas station or whatever. I've also been known to pump gas $1 at a time. ;)

[SunRise]

Thank you for the replies.

JenRN - impressive rates!, Ill definitely look around my town for a similar offer.
TiredX2 - I am mid 40s and have a mortgage. The past several years I was self-employed and now salaried, although, since 4/2007, I have been working yearly contracts, so every year I never know if my $$ situation will continue as is. Right now, Sept,  the contract has just been extended. So I can reassess my financial plan. I am trying to work up my "emergency" fund to make sure I have enough in case the contract is not signed next year (it was depleted in 2006/2007 when the company I worked for went dormant). As far as my IRA / retirement, it should be more the 10% based on where I am, and this year I wanted to get more on track with that. Thank you for the thorough answer - I will consider moving that mutual fund..maybe once I start a new one, I will move that one over - I have an American Fund, and am opening a vanguard one, which I understand to have much lower fees...I really should speak with an adviser, but for the time being am trying to find my own way.