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Having too much money is a good problem to have! The question you have to ask yourself is, "What kind of money do I want to have when I retire?" You have two options:

1) Tax-deductible, tax-deferred growth that you pay taxes on later.

2) NON-Tax-deductible, tax-deferred growth that you pay taxes on today, but never again.

Your EDC is pre-tax and is processed thru payroll deduction. You max it out every year under the assumption that you need all the deductions you can get now to lower your taxes so that you'll be taxed lower (in your assumed lower tax bracket) later.

The possible issue here is that it seems as if you're doing VERY well as far as putting large amounts of money away for your retirement. When that inevitable day comes where you decide to quit working, you may have saved so much for yourself that your tax bracket is, in fact, just as high, if not higher! No more deductions for mortgage interest, college costs, etc.........all you'll have is property taxes to write off.

I'll cut to the chase. Normally, if you wanted that tax-deferred growth w/ tax-free withdrawals, you'd have to invest in a ROTH IRA. The problem is, you make too much money (max is $150,000 income). Your only other option is something called a Life Insurance Retirement Plan ("LIRP") to get that tax advantage. Don't let the phrase "life insurance" scare you away! Obviously, this advice is unbiased as I'm not getting your business. The LIRP provides a way around paying those taxes on the growth of your dollars, creating a "Super Roth IRA."

So, the very long, drawn out answer to your question is:

If you want tax-free withdrawals later, invest in a LIRP. It's a life insurance policy that is invested in underlying Mutual Fund Sub-Accounts. The point is to max out the amount of money put into the mutual funds, while minimizing the % of premium that is allocated towards the cost of insurance.

If you want to simply put MORE money away and the tax treatment doesn't make a difference to you, then I'd go with a high quality Variable Annuity.

If you have more product-specific questions, don't hesitate to write back. Hope I offered a little insight.

Take care,
Adam D. Koos

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You are in a very, very good position. Two strong incomes, and it appears that you have strongly resisted the temptation to live beyond your means like most folks in this country. You are setting yourself up for very good years to come.
I would suggest that you take some of the funds currently going into the EDC plan into something else. 1 to 5% is a low return, although it is admittedly very safe. But at 43 and 50, you still have plenty of time to take advantage of stronger returns.
My suggestion would be to allocate one half, $30,000 a year to a more aggressive portfolio. One half of this, $15,000 should go to mutual funds. I never recommend buying a single fund, but instead buy four or five that all specialize in different areas of the economy. For example: real estate, technology, health care, energy, there are many. A good site for mutual fund research is www.morningstar.com
The other half of this more aggressive portfolio should go into stocks. Ouch, I know, so many folks lost so much in the past few years. But not the folks that did this the smart way. Most investors had all of their stocks in one or two industries. Like mutual funds, just pay attention to how you are allocated across industries. Hold 20 or more stocks at once. Research and update your portfolio regularly.
Mutual funds should return on average about double what your EDC plan currently gets. Some years will be great, others may return negative numbers. But over the next decade or two, your portfolio will be much larger.
Stocks should at least triple, probably quadruple your EDC returns. Again, you will have good an bad years. But over time the difference for you will be hundreds of thousands of dollars. I know the next question: Which stocks should I buy? It takes research. Only do what I am suggesting if you have the time and interest to truly research and learn about your investments.
I rarely suggest this to the readers of the forum as it is not my intent to market my company's service here. But I encourage you specifically to take a look at www.ValuEngine.com Do not sign up, just read some of the informational pages, and specifically look at the 'backtesting' and 'benchmark portfolios' link. My intent is to show you that there are highly specialized, quality independent providers of stock research out there that can guide your stock portfolio very successfully. There are also 'sensationalist' services that do a great job of advertising but have no value. Some good stock advice services include Investors Business Daily (IBD), Zacks, Multex Investor, Morningstar, and of course in my biased opinion ValuEngine.
Please do not hesitate to follow up with me, as this may generate more questions than it answers. If you have no interest in active management, and are the type of person that would not be able to sleep well at night with stock investments, then do not do it! You may want to consider bonds or CD's in addition to your EDC plan. It all depends upon where you want to be in a few decades, and the type of person you are, do not sacrifice life style for investments.

Sincerely,
Paul Henneman
President
ValuEngine, Inc.
www.ValuEngine.com

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