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Dutchess_III's avatar

What should I do with this $5000?

Asked by Dutchess_III (26838 points ) March 19th, 2014

I cashed out a retirement account after I lost my job. I want to invest it, but don’t know where to begin. We have an Edward Jones office here in town. Should I visit with the financial rep there?

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23 Answers

gailcalled's avatar

Check out Vanguard.com for really low fees. Here’s one

that mimics the Standard and Poor’s 500 fund.

For $5000, you can do the research yourself…not worth paying a financial advisor anything.

Take one of the Vanguard’s quizes on how to choose a fund, or try Fidelity.com for similar info.

Value, growth, tolerance for pain or temporary losses, etc.

jca's avatar

Vanguard has NO LOAD funds – which means no fee. You want to avoid paying fees if possible.

KNOWITALL's avatar

My friend makes about $500—$1000 per week on the stock market, you could study up and try.

Or you can do a tax-deductible IRA at your local bank. If you two, one for you, one for hubs, I believe you get a double deduction, that would help to offset the tax you will get charged for cashing out.

Add in some charitable donations or home repairs (energy-efficient) and you may not have any penalties. :)

gailcalled's avatar

The Vanguard info site. Check it out.

https://investor.vanguard.com/mutual-funds/fund-types

@jca is correct about some of the Vanguard funds being no-load.

Here is the Fidelity interactive site. They are both stalward investment houses with a long and stable history.

ragingloli's avatar

Splooge on a brand new gaming PC with twin titans and some games.

Pachy's avatar

Me, I’d either roll it over to a new IRA when you get a new job (I think you have two months to do this without penalty) or put it into a long-term CD.

gailcalled's avatar

@Pachy: CD interest rates are pretty crappy now, not as awful as a savings account but for $5000, not much bang for the buck

rojo's avatar

Give it to @blackberry so a soundproof room can be constructed and a stereo purchases.

or (if you listen to AM talk radio)

Buy gold or silver

or

Go on a trip to Europe with it.

funkdaddy's avatar

Roll it over into something else promptly and avoid the taxes. You can always move it around afterwards, just get it in an account with whoever you like. If you’re holding a check, it might already be too late, but I could be wrong.

It doesn’t matter what you invest it in, it will beat losing 30% to taxes and starting from there.

Tropical_Willie's avatar

@Pachy May be right, there could penalties and taxes if you don’t immediately reinvest it in an IRA ( 60 days really ). Did your old employer withhold any monies like 20 percent, you must make up the 20 % and invest the whole amount or stand to pay penalties and taxes.

Symbeline's avatar

Lemme a quarter.

KNOWITALL's avatar

@Symbeline A quarter?! Heck, Dutchess is buying cocktails for the house tonight, who’s up for a road trip to Kansas? lol

Symbeline's avatar

I’m there like a bear.

Blondesjon's avatar

$5000 will buy you 5000 lottery tickets. I like those odds.

ragingloli's avatar

^does not understand maths

chyna's avatar

I am thinking that you have 90 days to roll it over before you will have to pay taxes on it after you receive it from your old job. I don’t know how long you have been without your job, but it is something to keep in mind.

KNOWITALL's avatar

@ragingloli We have $1 lottery scratch-off tickets in the US.

ragingloli's avatar

I was talking about the probability of winning, which is 1 in 14 million for a 6of49 game.

Adirondackwannabe's avatar

@chyna It’s 60 days to roll it over tax free.

chyna's avatar

@Adirondackwannabe I stand corrected. :-)

SadieMartinPaul's avatar

Do a rollover to an IRA. I believe that you’re young, @Dutchess_III, so the $5K is subject to income taxation (federal and state) plus a whopping 10% federal penalty. But, if you put the funds into an IRA, within 60 days of the distribution, you’ll avoid taxation.

After the money’s in an IRA, you can talk with an advisor and decide how to invest it. Within an IRA, you can invest, buy, sell, etc. to your heart’s content.

By the way, the trustee should have withheld 20% for federal taxes. Yes, the 20% is part of your (currently taxable) gross distribution and, even though you don’t have the money in hand, it’s ideally rolled over. You can’t recoup the funds now, so they’ll need to come from other resources.

ibstubro's avatar

I’m with @gailcalled. I have a Vanguard account that is cheap and painless and I would recommend you putting your money there, @Dutchess_III.

$5,000 is a lot compared to an oil change, a pittance compared to the price of a new car. I suspect you’ll not have it invested long – I can even write checks against my Vanguard account as long as they are over $250.

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