Five investments better than a lottery ticket - WDRB 41 Louisville News

Five investments Mark Lamkin says are better than a lottery ticket

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Don't worry about the fact that your spouse spends $5 a month on lottery tickets. It's a nominal amount, and you may know he's actively saving for retirement. However, if he were shelling out, say $20 a week on lottery tickets that would be a different story. Financial expert Mark Lamkin from Lamkin Wealth Management would suggest better uses for the $1,040 it would amount to in a year. In fact, here are five ways to spend $1,040 with much better odds of getting a return than the 1 in 175,223,510 odds of winning the Powerball jackpot.

Pay down credit-card debt. Paying off a balance with an 13% interest rate (the average on fixed-rate cards now) is like earning 13% on your investments -- an incredibly valuable use of the money. And once you pay off your credit-card debt, you can start using that money to build your retirement savings.

Boost your 401(k) contributions. If you have an extra $1,040 to spare, then put that money to work for you in your retirement account. You'll really benefit if your employer matches your contributions. Investing an extra $86.67 a month (which is what $1,040 breaks down to over 12 months) in a 401(k) over 20 years costs you $20,801, but after two decades the account balance will be $49,632, assuming an 8% annual return and a 25% tax bracket. And that's with no company match. After factoring in the 25% tax savings, since the investment was with pretax dollars, the real cost to you is just $15,601. So you effectively triple your money in 20 years. Use our Power of Boosting 401(k) Contributions calculator to see how additional contributions to your account can add up over time.

Open a Roth IRA. If you're already maxing out your retirement account at work, contribute to a Roth IRA. If you invest $86.67 every month in a fund that earns a 7% annual return, in 30 years you'll have nearly $106,000. And you can withdraw your earnings tax-free after you turn 59½. For 2013, you may contribute to a Roth if your modified adjusted gross income is less than $127,000 if you're single ($188,000 for couples who file jointly).

Increase mortgage payments. A little extra goes a long way. A $200,000 mortgage at 4% over 30 years works out to a monthly payment of about $955 (excluding taxes and insurance). You'll pay nearly $144,000 in interest alone. But put an extra $86.67 a month toward the same mortgage and you'll save almost $24,000 in interest and retire the loan four-and-a-half years early.

Invest! in a taxable account. You might want to use the money to buy stocks or shares of mutual funds outside of your retirement account. If you invest $86.67 a month for 20 years in stocks or mutual funds with a 7% annual return, you'll have nearly $42,000. Spend that same amount on lottery tickets each month for 20 years, and you will have shelled out $20,800.

Lamkin Wealth Management

5151 Jefferson Blvd., Suite 102

or

901 Lily Creek Drive Ste. 102

office: 502-961-6550 Office

toll free: 866-961-6550

www.lamkinwealth.com

"Securities Offered Through LPL Financial, Member FINRA/SIPC and an Investment Advisor"

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