Investment suggestions for money in bank, IRA and 401k or paying mortgage - Starting from scratch

We have saved some money over the time. We also bought home few years back and have 2 school going kids. Wondering if it is good idea to pay mortgage or invest. We have $150k in our individual IRA accounts and another 25k in 401k. In bank, we have total $150k balance in our bank accounts. Getting 2.5% interest on 100k balance with reward checking accounts. House mortgage is around $250k (House is probably $500k worth).

We are saving decent money from our earnings. But our problem is not making any money from the saved money. Is it good idea to pay up mortgage. I have refinanced it to 15 year mortgage with 2.75% interest. I need to start learning about investing and doing it myself. Any guidance is appreciated. My age is 40+. Not sure if it is too late to invest and build wealth. We have some fixed assets in another country which are illiquid and not completely in our control (managed by in laws and parents). Probably, that is where i am going to spend after my retirement. My immediate concern is to make some money out of our savings and retirements accounts.


This is an automatically-generated Wiki post for this new topic. Any member can edit this post and use it as a summary of the topic’s highlights.

Definitely don’t think you should pay off your mortgage. You’re already getting 2.5% vs 2.75% now, in 5 years you might be getting 5% vs 2.75%. At 2.75%, having extra cash available is a great advantage in flexibility.


What do you mean here? Do you mean you’ve got cash in the bank but you’re not happy with the interest you’re earning?

Thanks for the feedback. We will stick to 15 year mortgage plan instead of prepaying.

Not doing much with IRA balances. Need to find a some fund which can generate at least bank interest. We didn’t invest in stock market. Money is just there sitting in some fund without doing much for some time.

I’m replying to your post on the HSA thread here because I think it is a better place for it. Schwab has good target date funds, extremely low fee.

What is your risk tolerance? If tomorrow your $150k was $100k on paper would you sleep soundly at night?

1 Like

Duplicate post.

Thanks for link for Schwab target funds. I will check it out. I will be very disappointed to loose $50k in a day. My risk tolerance is very at this stage. I would like to keep it safe and spend some time understanding various investment ideas. Thanks

The largest single day percentage drop of the S&P 500 was 20%. So, if you had invested all of your IRA money the day before that, you would have lost $30K. The longer the time period in a broad market fund, the more likely your funds are to grow. However, there is no guarantee. If your risk tolerance is low, you can invest in a very conservative fund/index and most likely will beat bank interest rates.

If you can’t handle even modest losses, you should stick to CDs.

ETA: The second largest single day percentage drop of the S&P 500 was 9%, so the 20% was a pretty big outlier.


Read this: Stock Series - JLCollinsnh

Or get his book.

1 Like

A bit too much hyperbole on my part–I didn’t mean to say that in one day you could lose 33%. But large losses are extremely tough for some people to handle. The ways OP was asking for regular stable, low growth seems like even low risk funds might be too risky.

Did you read this?

The second section applies to you.

I would not pay off a 15yr fixed at 2.75%. If inflation heats up, you may be earning more than that on your savings account before you pay off your mortgage. And if we don’t have another recession or crash, stocks might return more than that in the long run.

1 Like

Thanks for the book link. I am going to read some investment related stuff before investing into stock market.
Thanks again.

1 Like

Thanks again. We are not going to pay off mortgage.

1 Like

Can you please share the name of the bank?

Look for a foreclosure and rent it out. Rinse and repeat.

A few tips from a guy that saved enough to retire at 51:

Dump as much as you can into your 401k, enough to get the max company match but ideally more than 10% if you can afford it. Put everything into a Total Stock Market index fund (add international stock index fund if you wish up to say 30% or so of total funds).

Open a Vanguard, Fidelity, or Schwab account and setup an auto-draft from your savings every month into a Total Stock Market index fund. Do as much as you can afford.

Max out your Roth IRA contributions every year, use same stock index fund.

A few years before you retire, adjust your 401k to the asset allocation you want (example is 75% stock 25% bonds). Make sure all the bond fund money is in the 401k for tax reasons.

At your age you need to be maxing out these accounts, you have nowhere near enough liquid assets right now unless you can live off of your outside stuff.

1 Like

It is local credit union with reward checking accounts. They have 2.5% interest for max balance of 50k. Requirements are steep ( 15 transactions with $5 min for each translation).

1 Like

Thanks for the feedback. I am maxing out my 401k contributions with 25% match from employer. There is no 401k for spouse. I am working on adding $5500 to IRA account. I am 40+ years and also need to take care of college for 2 kids down the line. We have some illiquid fixed assets but those are in completely different place. They won’t help us here. I have to find a way to save more money and make something out of savings / 401k balances. I never looked into Roth IRA before. I need to explore Roth IRA, Student savings and life insurance.