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<blockquote data-quote="DaytonIllini" data-source="post: 907806"><p>zoggle - a money market account is a lot like a checking account with some key differences.</p><p></p><p>(1) You usually are limited in how many transactions you can make per month to something like 5 or 6.</p><p>(2) Sometimes you have to make transactions (withdrawals) in large amounts like $250 minimum.</p><p>(3) There is an animal called a money market mutual fund which is not FDIC insured in contrast to a regular money market fund which usually is.</p><p></p><p>They generally draw very little in the way of interest, have almost zero risk and very little upside. Usually they lose money vs. inflation over long periods of time. </p><p></p><p>Money market funds are perfect for an emergency fund from which you may need to remove money in a pinch. I keep one-half year's salary in a money market fund as an emergency fund.</p><p></p><p>To save for a kid as young as yours you can probably afford to take significantly more risk. If the money is earmarked for his higher education you can open a 529 account. They let your money grow tax free as long as you remove the money for college expenses. If not though you pay a big penalty. If you can put $150 a month away for him on top of the $1200 you could expect to save about $70K in a 529 that draws 8% by the time he goes to High School. In a taxable account that grows at the same rate you'd have only $57K if you are in the 25% bracket. So it can make a big difference. One nice thing about 529's is that you still own the money so the kid cannot go buy a corvette when he turns 18. You get to dole it out. Plus you can change the beneficiary to another kid or even your wife if she goes back to school for some reason. Most 529's have a variety of investment options. The Ohio one is highly rated (you don't have to invest in your own state) and let's you invest in an age appropriate account where they manage everything for you using Vanguard's low expense funds.</p><p></p><p>As for the pension question, you have to be careful. I have heard that it is usually best to create a rollover IRA for when you leave a company and take a pension with you. You really have to be careful though because if it is done wrong you can incur penalties that can be huge. Under no circumstances can you accept a check and put it in your checking account and then write a check to the IRA company. You cannot do this even for 5 minutes! Fidelity or Schwab or similar company have people that know exactly how to do this and can walk you through the steps if she chooses to move the pension. Pension plans often have limited investment options and high expenses. You'd be wise to get advice from a professional and not someone like me that answers your questions on line. We moved my wife's pension to a Rollover IRA when she left her job a long time ago. I've always had a self-directed pension that follows me wherever I go so I don't have a ton of personal experience with this part of the question.</p></blockquote><p></p>
[QUOTE="DaytonIllini, post: 907806"] zoggle - a money market account is a lot like a checking account with some key differences. (1) You usually are limited in how many transactions you can make per month to something like 5 or 6. (2) Sometimes you have to make transactions (withdrawals) in large amounts like $250 minimum. (3) There is an animal called a money market mutual fund which is not FDIC insured in contrast to a regular money market fund which usually is. They generally draw very little in the way of interest, have almost zero risk and very little upside. Usually they lose money vs. inflation over long periods of time. Money market funds are perfect for an emergency fund from which you may need to remove money in a pinch. I keep one-half year's salary in a money market fund as an emergency fund. To save for a kid as young as yours you can probably afford to take significantly more risk. If the money is earmarked for his higher education you can open a 529 account. They let your money grow tax free as long as you remove the money for college expenses. If not though you pay a big penalty. If you can put $150 a month away for him on top of the $1200 you could expect to save about $70K in a 529 that draws 8% by the time he goes to High School. In a taxable account that grows at the same rate you'd have only $57K if you are in the 25% bracket. So it can make a big difference. One nice thing about 529's is that you still own the money so the kid cannot go buy a corvette when he turns 18. You get to dole it out. Plus you can change the beneficiary to another kid or even your wife if she goes back to school for some reason. Most 529's have a variety of investment options. The Ohio one is highly rated (you don't have to invest in your own state) and let's you invest in an age appropriate account where they manage everything for you using Vanguard's low expense funds. As for the pension question, you have to be careful. I have heard that it is usually best to create a rollover IRA for when you leave a company and take a pension with you. You really have to be careful though because if it is done wrong you can incur penalties that can be huge. Under no circumstances can you accept a check and put it in your checking account and then write a check to the IRA company. You cannot do this even for 5 minutes! Fidelity or Schwab or similar company have people that know exactly how to do this and can walk you through the steps if she chooses to move the pension. Pension plans often have limited investment options and high expenses. You'd be wise to get advice from a professional and not someone like me that answers your questions on line. We moved my wife's pension to a Rollover IRA when she left her job a long time ago. I've always had a self-directed pension that follows me wherever I go so I don't have a ton of personal experience with this part of the question. [/QUOTE]
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