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007 · 10-31-2007, 07:25 PM

I am currently contributing 6% to my 401K to get my employer to match it, then i have maxed out my Roth IRA. I still have additional income to invest and i want to know if i should start laddering some CD's, or should i put it in my 401K? I do not need access to this money now, but i want to have large CD's available when i get to retirement age. Im thinking that if i start laddering now (i'm 40) i can start out small ($1000 CD's) and slowly grow them over time. <br /><br />I guess my question is which option would net me more at retirement?<br />

dotru · 10-31-2007, 07:25 PM

You are 40 years old, that means that you still have at least 20 years time horizon. With such a time horizon nothing will beat the stock market, so I would definitely put more money into 401K all the way up to the maximum allowed by law (15,500 this year). Start working on CD's when you have 5-7 years before retiring.
I am 40 years old and maxing out my 401K, keep most of my money in index funds i.e. S&P500 and some in international indexes. In 20 years CD's will not even come close in performance with the stock market.

Good luck.

invest01 · 10-31-2007, 07:25 PM

i would split the difference == half in Cd's and have in 401K!!!

sox · 10-31-2007, 07:25 PM

If CD rates ever inch significantly above the historical return on the market (8-12%) then you have to really consider your CD option. My grandparents locked in some long term CD's (laddering) back when the rates on these were above that range. It will be tough to do at the time because odds are the market will be returning 20+ % when rates are that high, but will surely return to the norm. Some rare advice...when you get closer to retirement, hold your index funds in your non retirement account and switch your retirement holdings to the CD's. This way the money outside retirment is not taxed every year as interest but one time as a capital gain whenever you do sell it, vise versa the CD interest will not be taxed each year inside your retirement account. Hope that helps, (use the 401K for now).

BOB+ · 10-31-2007, 07:25 PM

you sound like you knoe what you are doing...401k to the match comes first....roth ira comes second...then go back to your ira with the remaining

10-31-2007, 07:25 PM	#1
007 Greenhorn Join Date: Jul 2006 Posts: 16 Rep Power: 0	CD laddering or add more to my 401K? I am currently contributing 6% to my 401K to get my employer to match it, then i have maxed out my Roth IRA. I still have additional income to invest and i want to know if i should start laddering some CD's, or should i put it in my 401K? I do not need access to this money now, but i want to have large CD's available when i get to retirement age. Im thinking that if i start laddering now (i'm 40) i can start out small ($1000 CD's) and slowly grow them over time. <br /><br />I guess my question is which option would net me more at retirement?<br />

10-31-2007, 07:25 PM	#2
dotru Greenhorn Join Date: Jul 2006 Posts: 16 Rep Power: 0	CD laddering or add more to my 401K? You are 40 years old, that means that you still have at least 20 years time horizon. With such a time horizon nothing will beat the stock market, so I would definitely put more money into 401K all the way up to the maximum allowed by law (15,500 this year). Start working on CD's when you have 5-7 years before retiring. I am 40 years old and maxing out my 401K, keep most of my money in index funds i.e. S&P500 and some in international indexes. In 20 years CD's will not even come close in performance with the stock market. Good luck.

10-31-2007, 07:25 PM	#3
invest01 Greenhorn Join Date: Jul 2006 Posts: 35 Rep Power: 5	CD laddering or add more to my 401K? i would split the difference == half in Cd's and have in 401K!!!

10-31-2007, 07:25 PM	#4
sox Piggy Bank Join Date: Jul 2006 Posts: 59 Rep Power: 5	CD laddering or add more to my 401K? If CD rates ever inch significantly above the historical return on the market (8-12%) then you have to really consider your CD option. My grandparents locked in some long term CD's (laddering) back when the rates on these were above that range. It will be tough to do at the time because odds are the market will be returning 20+ % when rates are that high, but will surely return to the norm. Some rare advice...when you get closer to retirement, hold your index funds in your non retirement account and switch your retirement holdings to the CD's. This way the money outside retirment is not taxed every year as interest but one time as a capital gain whenever you do sell it, vise versa the CD interest will not be taxed each year inside your retirement account. Hope that helps, (use the 401K for now).

10-31-2007, 07:25 PM	#5
BOB+ Piggy Bank Join Date: Jul 2006 Posts: 96 Rep Power: 5	CD laddering or add more to my 401K? you sound like you knoe what you are doing...401k to the match comes first....roth ira comes second...then go back to your ira with the remaining

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