What's the best way for a 48 yo to invest 18K/yr?

[Yowza]

After my home was paid off, I continued the payment habit via savings account. With over $30K and monthly increases, I don't know what to do with the money. It is not involved in my normal or even emergency expenses. I modestly invest in my job's deferred compensation program but am unsure if increasing my contributions through them is the answer. For what it's worth, I hope to retire in 6 years for different full-time employment.

Much gratitude for any helpful suggestions. I'm a plowhorse worker and saver but not financially savvy.

[BudgetMath.com]

If you don't want to have any risk at all, I would suggest putting your money into government backed T-Bills. To look at the current rate schedule, just google "treasury bills results". And click the first result.

If you don't mind a little bit of risk, then I'd suggest getting a brokerage account at E-Trade or Schwab. Then find a highly rated investment find like a Vanguard. For a list of the 10 best Vanguard funds of 2011, just google "10 Best Vanguard Funds for 2011". And click the first result.

In summary, the first option has literally NO risk at all. You WILL make money from that investment. The second option has VERY LITTLE risk, so you will most-likely make substantially more money than the first choice. But there is some risk involved in it.

Hope this helps..

[greenskeeper]

physical gold and silver. "out of the system" and the tax man can't come after it. Or if you don't like holding the metal yourself a traded fund that is linked to physical precious metals, not paper.

[jpg7n16]

Your first step should always be to start with your goals and go from there.

The two posts above assume your goals (low risk and government avoidance) and start with the end product. Which is like a doctor giving you a prescription before doing his examination... Cough medicine won't do you any good if your problem is a strained bicep. Similarly, treasuries and precious metals may not do any good if your goal is.... well we don't know your goal!

So start with the following:
-what are your goals? (retirement, college savings, travel, liquidity, short term purchase, long time purchase, debt elimination, giving/charity, etc.)
-determine how much money you will need to meet your goals
-then determine what the time horizon is for those goals (how soon would you need the money?)
-would you say you are: extremely risk averse, low risk, average, okay with intelligent risk, or okay with a lot of risk?

Then you'd need to know where you are, before you can see how to get where you're going. So where are you starting from?
-how much do you already have saved towards your goal?
-do you have any debt? if so, how much? and at what interest rate?
-how much can you afford to save each year towards your goals? (you said $18k in the title, so this is really the only question answered so far)
-what tax bracket are you in?
-if retirement, what options are offered at your job?

When you say you've got $30k with monthly increases, is that your salary? or is that the balance you've already saved up? I think you meant a balance saved up, but I'd just like to clarify what you meant.

Once you know those questions, we'd be much better able to help you plan out how to get where you'd like to go. But as is - you've only really answered 1.5 of the 9 questions, so the advice you get won't be very good.

[snafu]

Once you've established your goals, you will need to assess your Risk Tolerance. You need to be able to sleep at night without worrying about what's happening to your money. Take time and read some of the books that are favorites of posters here.

We realize our retirement funds will need to last 35 years with a 4% annual draw down...yikes!

[clintdavis]

Hi Yowza,

Thanks for sharing. To keep things very simple, stable, and effective...you should max our your contributions to your 401k plan at work. Those contributions will grow tax free and you will usually get a match from your employer. After 401k, you will want to invest in a Roth-IRA. All money you invest in a Roth-IRA will grow Tax Free. Within your Roth, you will want to invest in a good mix of growth stock mutual funds.


My best advice is to find an investment professional that will take the time to understand your goals, teach you about your options, and be available to you to answer questions or help you make changes to your retirement plans.

You have done a fantastic job paying off your debt and saving. You just need to make sure that it grows into a comfortable retirement inside of tax-favored accounts.

For the record, gold and silver are highly volatile and will rarely ever give you a good return. Stay away from investing in precious metals or other commodities.

Thanks again for sharing! Keep up the good work!

[Yowza]

I've more closely followed your insight (although some had similar advice!). I have increased my current retirement contributions through my job. Also, I've opened my first Roth IRA since preparing for retirement is my primary goal.
Thank you SO much!

Originally Posted by clintdavis

Hi Yowza,

Thanks for sharing. To keep things very simple, stable, and effective...you should max our your contributions to your 401k plan at work. Those contributions will grow tax free and you will usually get a match from your employer. After 401k, you will want to invest in a Roth-IRA. All money you invest in a Roth-IRA will grow Tax Free. Within your Roth, you will want to invest in a good mix of growth stock mutual funds.


My best advice is to find an investment professional that will take the time to understand your goals, teach you about your options, and be available to you to answer questions or help you make changes to your retirement plans.

You have done a fantastic job paying off your debt and saving. You just need to make sure that it grows into a comfortable retirement inside of tax-favored accounts.

For the record, gold and silver are highly volatile and will rarely ever give you a good return. Stay away from investing in precious metals or other commodities.

Thanks again for sharing! Keep up the good work!

[snafu]

Yowza: Good on you for taking your 1st step. The 2nd step is to know what your 401K holds in it's investment portfolio. What investments will you chose for your Roth IRA? The stock market is currently unsettled so many of us see this period as a terrific buying opportunity. I suggest you look on-line at an Exchange Traded Fund [ETF] that holds dividend paying stock. If you like the names of those companies, you will feel ok with that holding. Alternatively, a low cost mutual fund {MF} is also an effective tool for a 48 y/o. You can DCA [Dollar Cost Average] contributing a specific amount each month. Be prepared for fluctuation, the value goes up and down but over the long term the results are positive.

The biggest mistake new investors make is to buy when the market is positive and sell when stocks are falling. That is the opposite of what is an effective plan. With interest rates so low and expected to stay flat and costs of gas, food and utilities increasing substantively, you loss even more buying power to inflation. Keep in mind that many retirees must have funds to take them through 35 years.

[danieldroga]

Originally Posted by Yowza

I've more closely followed your insight (although some had similar advice!). I have increased my current retirement contributions through my job. Also, I've opened my first Roth IRA since preparing for retirement is my primary goal.
Thank you SO much!

It is good that you have found a way to solve your problem with such helpful advice from different experts here in this forum.

[maat55]

You will want to max out your Roths before contributing past your employers match.