Meyers Wealth Management
After many years working at the institutional level with very large-scale portfolios of bonds and structured securities, David Meyers set up Meyers Wealth Management in order to work with individuals, families and small businesses.
He started at Salomon Brothers in New York in 1993 and spent several years modeling complex structured fixed-income products, particularly focusing on mortgage-backed securities and the prepayment models. Since then, he's had various roles at a hedge fund and two institutional money management firms modeling securities and portfolios and focusing especially on risk management and quantitative measurement of security and portfolio performance.
In 2008, he established Meyers Wealth Management as a state-level Registered Investment Advisory firm in Massachusetts and in 2009, moved to Palo Alto, California.
BS, Applied Physics, Emory University
MS, Applied Mathematics, Georgia Institute of Technology
That’s not really a great measure. Consider what percentage of your spendable income you can reasonably spend on a car. Start by getting an idea of all your expenses, list the goals for which you want to save (retirement, etc), and after putting aside what you need for those goals and other necessary spending - what’s left may - may - be available to use for paying for a car. This applies whether you finance the car (and thus figure out what level of payment you can make) — or you pay cash for the car (in which case, you need to then start a new program of saving towards the next one — so you still should be thinking in terms of how much, on a monthly basis, you can afford to put towards the car).
If you are paying for it out of cash savings, make sure you leave enough in your savings for your day-to-day spending needs (we usually recommend 1-2 months total cost of living in one’s everyday checking account) — plus enough cash to keep your emergency fund adequate (usually in a regular FDIC insured savings account, and typically anywhere from 3 to 12 months total cost of living depending on a variety of criteria (one earner vs. two earner, regular employment vs. self-employment, general job stability, etc)).
Bear in mind that any advice here is going to be very general - not specific to you or your situation. There are nowhere near enough details for anything more than generalities here.
(a) you're putting away a good deal into retirement (presumably by "deferred compensation" you mean a 401(k)?) How much is there? Have you run any kind of projections to see if that's going to be enough for your future retirement?
(b) with that mortgage rate, and at your age, there's very little reason to consider accelerating paying down that mortgage. Partial pre-payments don't help your monthly cash-flow (they shorten the life of the mortgage, but your monthly payments generally stay the same), and much of your investing should be long-term and you likely have a fairly high risk tolerance, so over the long run, you should be able to get a better return (with a lot more risk, of course) investing rather than speeding up your mortgage. Moreover, mortgage payments result in a highly illiquid asset - an increase in your home equity - rather than a liquid asset (savings, retirement account, etc).
(c) if you're eligible to put money into a Roth (mainly due to income limits) - it's almost always a good idea. Direct contributions to the Roth may also be able to be removed (though not the growth) without tax or penalty - so there's often no reason *not* to put excess cash on hand into a Roth if you have it available.
(d) the 529 is a great idea -- but, and again, this is just in general, if you're not maxing out the Roth IRA first, you should probably be doing the Roth.
As to how the Roth and the "extra" cash are invested - you need to assess your goals, time horizons and risk tolerance. If the Roth money is really going to stay invested for the very long term, for your retirement (which it should!) - it's a great place to be aggressive and look for the most long-term growth, since all that growth will eventually be tax-free.
The other $30K -- again, what's it for? How much risk can you take with it? If you need that full $30K to be intact and at least $30K in the shorter-term future (i.e., to pay for that addition to the house) - then perhaps you cannot afford to take stock market risk with it. Think about how it would affect your plans for that money if a substantial chuck wasn't actually there when you'd planned. Just making up numbers here, but suppose the stock market went down by 40% (again) right before you needed the money -- could you postpone the project or spend a lot less on it? Is that a risk you're prepared to take? If not, then you can't put all of that "extra" into stocks.
Sorry I couldn't be more specific. If you can find a CFP professional financial planner nearby who works on an hourly basis, you may really benefit from paying for an hour or two of time for a consultation.
12 x $800 = $9600.
$9600/50,000 == < 20%
There's no reason something worth $50,000 couldn't pay out $9600 each year for 5 years. You could stick $50,000 in an FDIC insured bank savings account, earning less than 1% and pull out more than $10,000/yr.
In fact, if the numbers you've posted are correct, you're earning not only less than 4% interest (over those five years) but actually *losing* money over those 5 years.
If they're projecting the 4% growth between *now* and when you're 60 -- presumably a long way off -- that's not a terribly surprising figure. You can investment grade bonds which yield around that right now. Just for reference, a certain long-term corporate bond index fund -- with a duration of around 14 years and an average (current) bond maturity (within the diversified portfolio) of around 24 years -- is showing a current SEC yield of over 4%.
As you said, there are a lot more factors here - what are the terms of the contract, does it have other payout options, etc. etc. As well as issues about yourself -- how old are you now, how long a way off is 60, and how much are you putting in now (or are you putting in the money a bit at a time over many years), etc. etc.
So - no - with what little you've given - those numbers don't look terribly surprising at all. If you have any concerns, contact the annuity company and/or the person who sold it to you and ask for more clarity and illustrations of how they come up with the numbers.
That’s not the right question. If you only have 2 months, sure, you can invest in stocks, but stocks are volatile and it’s nearly as likely that you’ll have less money after two months as that you’ll have more money. If you need to still have $100,000 at the end of two months, the only place for that money is probably an FDIC-insured savings account.
Even if you can afford to take risk — “what stocks should we invest in” is still almost certainly the wrong question unless you are simply gambling because the stock market as a whole moves about with great randomness over the short run, and individual issues even more so. If you’re determined to put that money at risk in the hopes of making more (and understand fully that you may well have a lot less than your starting value two months from now), consider a low-cost diversified portfolio consisting of an index fund or two.
But really - “2 months” is a red flag. Stock market investments are LONG term investments, not two month gambles. Money you need in two months should be in cash or cash-equivalents (such a possibly a CD which matures in 2 months, or a money-market fund). Not stocks.
Often, no. You may take withdrawals from a 401k at an earlier age. Your 401k may have better creditor protection under federal law.
On the other hand, rolling it into an IRA may give you more investment options (not necessarily better ones - some 401k plans are excellent). Also, if it’s rolled into an IRA, and you’re over 70-1/2, you may aggregate RMDs across multiple IRA accounts. You may not do that with 401k plans. And finally, just on a general administrative level, it’s often easier to deal with an IRA custodian rather than a 401k custodian because the 401k is tied specifically to the former employer and the former employer’s plan.
That said, we do often recommend folks roll former employer 401k plans into current employer 401k plans rather than IRAs - while one is still working - if the new plan is excellent, with low costs, good investment options and administrators we like. But that’s more of an issue regarding keeping the 401k investments intact on an ongoing basis, not regarding “taking any money out” as you’d asked. It would help if you could describe more about what you mean by “taking money out” — are you retired? How old are you? What are your investing goals? What other investments and investment accounts to you have?