How to invest new raise

[Zedon]

I am getting a large raise, something around 30-35k. I currently put $500 a month in my 457 plan which I just started last year. The return is only 5%(ROR) and I tried to be aggressive. Should I max it out to defer the taxes or with it performing at only 5% should I invest it myself. I already max out a roth ira, have done that for a few years now, but this raise will put me into the 28% bracket by just a few thousand $.

Where I work there is no match.

My only real debt is my house payment which I just purchased in 2012. So another 28 years on that.

or other suggestions for investing the money.

[bjl584]

Do you have a ROTH IRA? A taxable brokerage account? Those would be good places to invest.

[feh]

I am getting a large raise, something around 30-35k. I currently put $500 a month in my 457 plan which I just started last year. The return is only 5%(ROR) and I tried to be aggressive. Should I max it out to defer the taxes or with it performing at only 5% should I invest it myself. I already max out a roth ira, have done that for a few years now, but this raise will put me into the 28% bracket by just a few thousand $.

Where I work there is no match.

My only real debt is my house payment which I just purchased in 2012. So another 28 years on that.

or other suggestions for investing the money.

First of all, I wouldn't sneeze at 5%. Please don't have the misunderstanding that it's a piece of cake to do better.

That being said, I'm not familiar w/ 457 plans, so I can't give specific advice. I suggest you start with the basics; here is an excellent start: http://www.bogleheads.org/wiki/Bogle...g_start-up_kit

[autoxer]

I am getting a large raise, something around 30-35k. I currently put $500 a month in my 457 plan which I just started last year. The return is only 5%(ROR) and I tried to be aggressive. Should I max it out to defer the taxes or with it performing at only 5% should I invest it myself. I already max out a roth ira, have done that for a few years now, but this raise will put me into the 28% bracket by just a few thousand $.

Where I work there is no match.

My only real debt is my house payment which I just purchased in 2012. So another 28 years on that.

or other suggestions for investing the money.

I think it is best to max out your tax deferred options first, before funding a taxable brokerage account, especially as you reach the higher tax brackets. Maxing out your 457 plan might even drop you back down to the 25% tax bracket. Do you know what your 457 or ROTH are invested in? Asset allocation? The funds that you choose to invest in are really what determines the return on investment. Do the funds in your 457 plan have high expense ratios?

What is the interest rate on the mortgage? Do you pay PMI?

[Zedon]

I think it is best to max out your tax deferred options first, before funding a taxable brokerage account, especially as you reach the higher tax brackets. Maxing out your 457 plan might even drop you back down to the 25% tax bracket. Do you know what your 457 or ROTH are invested in? Asset allocation? The funds that you choose to invest in are really what determines the return on investment. Do the funds in your 457 plan have high expense ratios?

What is the interest rate on the mortgage? Do you pay PMI?

Hi

My mortgage rate is just under 4%. I don't pay PMI. My roth is in some mutual funds, individual stocks and some cash, all of which I have chosen. My 457b is less hands on. So far I just choose risk level and then type of fund like indexes in a large cap or international. I have to do more research to see if I can pick specific funds. Its divided, 30% int, 30% large cap, 20% mid, 10% small, 10% other from memory. I just started it last year so there is only about 7k in there so far. They are currently low expense ratio. I may be able to have more say if I choose to go with a higher ER.

[creditcardfree]

If it were me I would put more into the 457. It is your best way to reduce the amount of income that is currently taxed at that high income tax bracket. I would research which funds within the plan are best and invest more within those. I'd probably put more in small and mid cap then you already are.

[snafu]

http://moneysmartguides.savingadvice.com/2014/08/21/your-investments-are-costing-you-your-re_144350/

I hope the link works, it's one of today's blogs. With only a modest amount invested in that particular plan, it's sounded like a lot of diversification and therefore inadvertently increased your costs.

[Zedon]

In my research it looks like I could put money in both a 457b and a 401k which would be 17.5k x 2 =35k. Not sure I could afford to do both fully but I could probably do a little more than 17.5 if I do it before I get used to spending it.

[sandrark]

That's exactly what I would do. But first, I'd refinance to a 15 year mortgage. You'll save tens of thousands in interest payments, and have a lot more equity if/when you go to sell (or retire).