Retirement

Smonet

As most of you may remember I'm making some huge financial changes...for the better. 2014 will be a year of learning and applying these new things financially. 

My current dilemma: I am sitting with $15,000.00 in Apple stock. Do I sell and max out a roth for myself? I currently am contributing 4% to an employer matched 401K and DH is contributing 1% (gasp) and his employer will match 4% (he is upping it this  month since realizing this-he thought he was at 4?). What should I do with the rest? I would like it to be in something that will earn better than a savings account but nothing I have to play with. I like the idea of the targeted fund accounts on my current 401K and the Roths. Do I also open and max out a Roth for DH with this $. This was a gift from my parents when I graduated college. I used the rest of it to help buy our rental and primary residence. Do I share with DH assuming this will contribute to "our" retirement. Or do I put it into something else with my name on it? 

Other areas that could use financial improvement:

I also have $2,000.00 in my savings account. I am aiming at contributing 1000-1500 additional each month to build it up. I could put some there.

I also have a HELOC at a variable rate (which is low right now) with a balance of $21,000.00. Long story short to avoid flaming: I purchased my first home 9 years ago. When I met DH we each owned our own home and were upside down on both due to the market. We took a loss on his, and are able to rent mine out. We stole a foreclosure on our current home so it was well worth it to lose 30k on his house to save 100-200k on the new home. However, we have renters in my old house but there were 2 mortgages on it. I bought it back when they were advising you to put 0 down. The rate on my 2nd was at 8% so I paid it off with my HELOC which sits a bit over 4% right now. I figured it was a smart move while paying it off. I'm only paying 300.00 a month on it though. I just hate to throw a ton of money at it since its a low payment at a low interest rate.

Thanks for your input.

vlagrl29

If you do decide to open a Roth, I would sell only the profits of the apple stock and use that to open a roth.  Keep some apple in your current fund.

smerka

First I would figure out how much tax you will owe when you cash out the Apple stock. If your parents bought the stock a long time ago, you could have a pretty big capital gain to pay on. Take what you will need to pay the taxes (it will go on your 2014 taxes which you will pay in 2015) and put it in something secure like a 12 month cd or a savings account. I also want to point out that you can make your 2013 contribution to an IRA until April 15, 2014. So my recommendation would be to fund 2013 and 2014 in a Roth for a total of $11,000. Between that and the taxes, you will probably wipe out the whole amount. But if you have any left over, I'd put in an emergency fund.

MommyLiberty5013

Ditto the tax thing...you should check into that.

Side note: The rate on your HELOC is variable and you should just be aware that the rates are rising...very slowly, but still rising. You may wish to check with the lender and see if you can lock it. There will probably be stipulations on this and probably some fees, but it may be a benefit to you to ensure a consistent payment and rate. You my also wish to pay this down a little bit (make a principal only payment).

Basically anything you decide to do will be a good, responsible use of this money. It all comes to your comfort. Maybe you want to split it between a few things.

hoffse

Focusing just on the Apple stock for a moment, yes you will owe capital gains taxes on it.  The nice thing about capital gains, is the taxes will only be 15% on whatever gains were earned since your parents first bought the stock (since this was a gift, you will "inherit" their original tax basis).

Worst case scenario is you will owe $2250 in taxes.  It ought to be a good bit less than that, because that's assuming you have had $15,000 of gain, and that seems unlikely.  But still.  Call it $2250 for planning purposes.  If you pay that out of the stock itself, you now have $12,750 to play with.

I would take $11,000 of that and put it toward your and your husband's 2013 Roths - whatever you still need to fund those in full.  You have until Tax Day to fund the previous year's Roth, so you have some catching up that you can do.  Assuming you haven't contributed to them at all during 2013, that would eat up $11,000.  Then take the $1,750 left over (or whatever this number really is) and put it toward your 2014 Roths.

I do think that if you feel as though you and your husband will be married forever, funding his Roth is just as important as funding yours.  At the end of the day, money is pretty fungible for a married couple.  I have been funding my husband's Roth while in law school because I have no intention of divorcing him, ever.  And if I die young, I want his retirement secure.  Still, if that makes you uncomfortable, then fund your 2013 and 2014 Roths in their entirety (which would be $11,000) and then use the $1,750 leftover for your savings or to jump-start your husband's Roth.  Then you are getting the lion's share of it, and whatever is left is still being used constructively.

If you plan on keeping the house, I probably wouldn't pay off the HELOC with interest rates that low.  Do check and see if it's variable, though, as PP mentioned.

wife07mom09

Id pay off your debt and then work on building 3 mo of emergency savings and then worry about the roth

hoffse

I'd worry about the Roth now.

I averaged a 28% return across my various funds during 2013.  That's way better than a 4% loan.