Now that I received my bonus (a little more than last year which is great), I have to figure out what to do with my savings. I also realized that my online savings account rate where a lot of my cash is has fallen to 1.1%! Ouch. It's tough times for savers. So, this is my strategy:
-- $10,000 contribution to non-deductible IRA (5K in 2010 and 5K in 2009). This way even if I want to buy an apartment at some point, I can use this money towards that). It also lets me do something with this money i.e. invest it. And, it gives me the option to convert it to a Roth IRA, without having to pay any taxes since its a new account. Seems like a solid strategy.
-- $50,000 1 year CD. My credit union has a good rate for a 1-year CD -- 2.5%. I'm a little nervous about locking the $ up for a year, but I can always pull it and pay the penalty if I need to.
The rest of my cash will stay in my high yield checking account which still has an interest rate of 3.25% or something in the 3s anyway.
Sound like a good plan? I like it because it boosts my retirement savings, which I'm very behind in according to my Puddin Score. And it lets me invest that money, tax free. While I still have a strong cash cushion.
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3.25% is a great rate! I haven't been able to find anything like that in this environment. Where do you have your checking account?
ReplyDeleteHi Annonymous,
ReplyDeleteIt's at a teeny bank in NJ, Provident Bank. You have to be a NJ resident to open the account.
Hi Kristin,
ReplyDeleteI believe (do NOT take this as gospel)that the law allows you to take a "loan" to buy a home for the first time without incurring a penalty, but still having to pay the tax. http://www.fool.com/money/allaboutiras/allaboutiras12.htm