[Ellien C]

For reasons I don't want to go into on a public forum (but which if you are dying of curiosity I will share with you if you PM me) I have a 401K refund of about $2800.

I'm considering 2 options for reinvesting it: DH's 401K (since it's technically put aside for retirement income) or daughters 529. What do you think I should do with this? Other opinions? We both max out Roth IRAs contributions. We have negligible CC in my opinion. It can be paid off in 3-4 months from "operating income" or we could dip into regular savings to pay it right away. I had some car repairs and plane tickets that I put on a card.

The last time this happened I swore I would shove it into DH's 401K since it belongs in retirement funds. But lately, umm, well, I'm not feeling like investing in DH long term. He's 10 years my senior and has never planned very well for retirement. He's contributed the bare minimum for the company to match his 401K and no more. When we married I set aside money for both of us to open Roth IRAs and contribute the max each year. We've done this for 10 years. He has over 15 years until retirement. Truth be told, we are just not at a high point in our marriage right now. I can't say for sure what will happen in the future. I do still love him, but living with him is becoming increasingly difficult. (OK nuff said here about that).

The other option is DD's 529 plan. I MADE DH start contributing about $25 a pay check to it and that's about all that has been going there. I guess I'm pretty settled on the 529 unless someone has other ideas. Is there anything I should know about adding to it? I can just deposit the refund check (which will affect my taxes in 2009) and write a check to her 529?

 

[sunflower.mama]

Working off the limited info you've shared, I think putting the $ into DD's 529 is a great idea. Perhaps you should figure out in advance what the tax implication will be in case you will come up short next year at tax time, and adjust your contribution to the 529 accordingly (so set aside whatever tax you will owe and contribute the balance).

 

[velochic]

Based on what you are saying about your marriage, would it be prudent to just put it in a high-yield savings account in case you need a little extra cash in the future? If your marriage tanks, you could perhaps need extra cash that has only your name on it.

I don't think the market is making any comebacks anytime soon. And while I seriously oppose the idea of timing the market, I don't think you are going to lose anything if you just hang on to it in "cash" reserves (CD, savings, etc.) for a while and then invest it later if life turns around.

Good luck!!

 

[fek&fuzz]

I would put it in a high yield savings account with my name only on it in case I needed to use it to hire an attorney at some point. And if not, then to just have it grow and be there.

Or I'd use it to meet with an estate planning attorney and talk about how I would want my money managed for my child if I predeceased my husband, who I'd want to manage my finances if I became incapacitated, etc. You could bring your husband if you wanted to and both get your affairs in order. That amount of money around here could get you a very well planned estate.

 

[Free Thinker]

I would put it into an IRA CD for YOUR retirement. There are ROTH IRAs or traditional IRAs if you haven't contributed your amount this year, and you can use mutual funds or CDs to invest in. Right now the rates are bad, but if you want the money to go to retirement savings (vs. just in your name in a savings account which is a good idea, too), then keep it retirement and in your name. I'm not a big fan of the 529 Plans, we have one for our kids set up, but so far it's just lost a ton of money, and I"m of the opinion that when your kids are college age we will be able to do a lot more for them if we have no debt, no mortgage and a healthy retirement fund. I feel like right now, when my kids are small, my job is to get myself in the best financial place to help them in the future. I do put gift money into the 529, even gift money for Dh and I, but I don't feel like it;s a necessary thing to contribute to all the time.

 

[milletpuff]

She is already maxing out IRA contributions.

Would the "refund" be considered an early withdrawal and therefore subject to the 10% penalty?

 

[Ellien C]

Thanks for your advice everyone. It's not an early withdrawal. It has more to do with my company. I'm not too worried about the tax liability on it next year. We end up with refunds (DH likes it that way and some things you just give on....) You guys have brought up some good points about the near term future. I don't think I'll need any "extra cash" in the near future. DH and I have kept pretty separate accounts so I think we would just manage that way. I'm in good shape financially. And one thing I can say for certain is that I don't see things getting ugly. (Does everyone say that?).

FT brings up some good points, too. I think I'm OK as far as retirement goes. I contribute 12% of my salary. Some 3% of that is matched and I contribute the max to Roth IRA. I've been doing this since my 20s and I'm only 39 now, so we should be OK. The house has a 15 year mortgage and we've got 10 to go on it. The interest rate is under 5%, I think. It should be paid off no problem by the time my kindy is ready for college.

I could open a traditional IRA on top of the 401K and the Roth, but I feel OK in terms of retirement. If for some reason we don't use the 529 for DD, we can still use that for our retirement, right? When I looked into it 5 years ago, I recalled the 529s being very flexible. I was quite divided on saving for our retirement and planning for her future. FTR - my school teacher and social work mom and dad planned really well for their own retirements.

 

[milletpuff]

Just want to reiterate that if you are maxing out a ROTH already, you will not be able to make contributions to a traditional IRA. The annual limit is for all IRA contributions, ROTH or traditional.

 

[p1gg1e]

Id take the fee and put it on the CC. that amount isnt that much and you would be better off DF IF you guys split.

 

[Ellien C]

Quote:

Originally Posted by milletpuff Just want to reiterate that if you are maxing out a ROTH already, you will not be able to make contributions to a traditional IRA. The annual limit is for all IRA contributions, ROTH or traditional.

Oh - thank you. If I ever knew that it's probably why we only have Roth IRAs.