We max out our 401k's and IRA's and have about $150k sitting in the bank. What should we do with this money?

We max out our 401k's and IRA's and have about $150k sitting in the bank. What should we do with this money?
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Dual income family, approximately $400k/year. We live in CT and net less than half after taxes. We have combined 401k of $550k in which we both max out every year with company match. $55k in IRA’s in which we max every year. We also have about 55k in company stock options. We also have college funds for our 2 kids -approximately $15K which probably isn’t enough to cover costs of college in 10 years. (Kids are 8,9) We owe $350k on our house (600k appraisal) and have about $10k in student loans that have extremely low interest rate (1.2%). No credit card debt, own one car and lease another. We have cash in the bank ($150k) and have no idea what to do with it? Pay down our mortgage? Buy a rental property? Stock market? Mutual funds? Pay off student loan? Keep it safe in the bank?
What would you do?


As a former NYC resident, I feel your pain on taxes. Great job on your commitment to retirement savings.
I am a big believer in liquid cash, and given your income, $150k in cash doesn’t strike me as excessive. I generally recommend people keep 3-6 months expenses in a savings account in case of job loss or another financial emergency. That said, I don’t think you need to keep adding to that. I would recommend you start investing additional savings. You can open a taxable brokerage account at any of the bigger firms (my clients use E-trade, but they all offer this type of account).
Hope that helps you think through the issues. Please let me know if you have any additional questions.
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Hi! Thanks for writing. Marc’s answer is great. I would like to add to it, first by saying “Way to go!” You guys are doing great, and you’ve followed the advice of every financial planner out there. You’ve positioned yourselves so well and done everything right. Your parents must be SO PROUD of you. And I hope you are enjoying your own two children as much as we enjoyed ours, who are now 24 and 28. We’d be happy to go back in time to when they were 8 and 9 if we could! Such fun years.
Your ideas for what to do with your extra money are super. I’ve listed them and my thoughts below:
Pay down our mortgage? You probably have a great low interest rate, so unless having a paid-off home is especially important to you, it makes more sense to keep the mortgage, continuing to pay off on schedule, and looking into investing your extra money.
Pay off student loan? Again, the low interest rate makes it worth continuing to pay off on schedule and consider investing your extra money.
Keep it safe in the bank? See note below on emergency fund
Stock market? Investing in stocks is a key part of an investment plan which is probably a good
Mutual funds? Mutual funds are invested in stocks and bonds, so they are a potential part of your investment plan. Your 401(k)s are probably in mutual funds already.
Buy a rental property? If you’d like to be landlords or have a vacation home, rental property can be a good investment
With regard to the money in the bank, I agree with Marc that $150K is not too much to keep liquid as an emergency fund in your situation – you could probably reduce it to $125K, but I tend to be overly cautious and like to have more. You might want to look into putting that in a money market account or in short term CDs to earn a little more than you earn at a bank.
Since you are all set with your emergency fund, with the extra money you have each month, you probably should start investing it. You can look into hiring a financial advisor to help you invest, use a “robo-advisor” investment house like Betterment, or explore investing on your own by opening a brokerage account with a place like Etrade, Fidelity or one of the many others out there. I like the safe, un-biased government website www.investor.gov to learn generally about investing. You can do research on finding an investment advisor through FINRA’s IARD search here: http://www.adviserinfo.sec.gov/
Additionally, you might want to start 529 plans for the children to augment the $15K in their college accounts. You don’t get tax breaks on the contributions now, but the money will grow in those accounts tax-deferred and then eventually escapes tax if used for the children’s college.
I could write lots and lots more but this forum won’t support that! I am so excited for you to be in this wonderful phase of life, and I wish the best to you and your family. Please write again if you need more answers or clarification. Have a great day!


I like Marc and Kathryn’s answers. But I’ll add a twist.
I do like the idea of rental property. It would help you diversify away from public investments.
I also like the idea of starting/buying a cash-flowing digital business (if you’re entrepreneurial at all). May take a little education, but you can find opportunities not available eslewhere.
It’s not unusual for an existing digital (read: online/internet) business to yield 25-50% cash flow to the owner.
Of course, it’s not for everyone. You may want to start small as an education investment…
Hope that helps!


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