48 years old, currently have no investments. My net worth is my car and the clothes on my back, and I don’t ever want to be in this situation again.
(Edit: I don’t need to buy a house or anything whatsoever related to a house, so please don’t mention the “h” word in your response, it’s triggering me for tangential reasons. Let me be clear, I will NEVER care about real estate whatsoever, mmmkay? Just trust me when I say I have a roof over my head and it’s completely paid off, no property taxes, and No, I will never sell it, so the whole h-word" aspect of life is not a concern for me, k?)
Just looking for guidance where to invest this relatively small amount of money every month so in a few years when I’m older & frailer I’ll have enough for retirement. I don’t want it to just sit in my bank account, I want it to grow.
For reference, I’ve been living on approx $1500 per month for as long as I’ve noticed, so I don’t need much per month, and the sooner I die, the less retirement fund I’ll need, but we can never predict when anyone’s death will happen, so let’s assume I’ll live to 100 because I’m ridiculously healthy & an exceptionally good driver, never been in an accident, one speeding ticket in my entire life, no social life so I never get into risky situations, so let’s just plan for the possibility I’m going to live another 50 years.
This is all great advice in this thread that I can vouch for. If you have more questions post more threads - this investing stuff is more or less a “solved” math problem so you’ll generally get “the right answer” from anyone in this community.
There’s also more to learn beyond what to buy and where it goes. You should also look into the psychology and strategy of Boglehead investing. You’ll need the nerves/rationality to never ever sell your stocks or react to market changes in any way. Don’t even look at the market or your money ideally. Set a course and trust the math. The best way to lose invested money is by touching it. The more you touch it, the more you lose. Index fund investing is so simple that you may feel anxious that you are not doing enough - this is normal and it’s important that you don’t start fiddling with your money by e.g. tilting towards tech or trying crypto etc.
Where physically do I go, and who do I contact to begin an index fund?
It depends on where you’re putting it. Someone already posted the US flowchart which I highly recommend following.
- If you’re putting it in a 401k you’ll be setting that up with your employer’s 401k provider, which you don’t get to pick.
- If you’re putting it in an IRA you get to choose your own provider, and the best ones that people recommend are Fidelity, Schwab, and Vanguard. You’ll be served well by any of those 3, as they are all friendly and have no fees etc.
- If you’re putting it in an HSA you’ll set that up through your employer’s HSA provider, which you don’t get to pick.
- If you run out of space in your 401k/IRA/HSA you can also open a “brokerage” account which gets put raw into the market with no tax-advantages, but has no yearly input limits. This type can also be started from your Fidelity/Schwab/Vanguard account.
There is lots of great advice here. I don’t want to cause contraversy, but I would suggest to invest between 10-20% of the investment money into high risk assets such as cryptocurrencies.
I have most of my investments in different funds (tech, medicine), a bit in a savings account (for emergencies) and a bit in crypto. I know there I a lot of hate there, but they have proven that they are here to stay. There is lots of fluctuations that can be hard on the nerves, but in the end, even though this is where I put 20%, it is today worth more than the rest combined.
Just stick to bitcoin and eth.
Crypto’s volatility is akin to gambling, and gambling does sometimes pays off. On average it does not - ask the epidemic of people who lost everything in crypto how they feel about it. Regardless, past performance does not guarantee future returns - the crux of index funds is that finding “the right winners” consistently over time is impossible, and doing it for 20-60 years straight without getting burned once or twice is even harder. You may be up on crypto at the moment but if that money is part of your retirement fund you need to choose when to cash out or how to hold crypto through your entire life without getting burned.
The common advice I see relating to crypto and stock picking is to dedicate ~$1000 into those risky ventures and see how much ROI you can get. Most often, people end up trailing their index fund returns and giving up with a cheap lesson.
What are your goals? Most people answer retirement, but I have friends who for genetic reasons will die at 55, they have different goals.
A house can be a great investment if you pay it off before you retire, since then you live there rent free. (You still have taxes and maintenance costs). However you have much less time to pay it off. Houses are about location though, for some they are great investments, for others really bad. You need to stay in the same house for many years though, if you move they are too risky.
In the US social security payments increase the longer you wait, so plan to retire at 72, or maybe draw down non ss funds first.
Are you married? This is a personal decision, but your spouse’s savings and income are factors as well.
I’m going to take a slightly different approach, although I generally agree with all of the advice here.
- Establish an emergency fund. If you’ve been living paycheck to paycheck and do not have a significant amount of money in accessible savings, you’re taking a risk of not being able to handle something like a car repair or unemployment. Withdrawing funds from tax-advantaged retirement accounts can take time and incur significant financial penalties. The rule of thumb is to figure out what you spend in a month, and plan on an emergency fund that can carry you through 6 months of zero income. Some people do less, some do more, and if you’re really thinking about it you can figure out what expenses you can cut in order to make those savings go further.
- Putting money into a matched 401k is a no-brainer, and going with an index fund or retirement date fund is the easiest way to go. However, realistically examine the expected savings by the time you plan to retire. This tells you how much you’ll be able to draw down and for how long. I’m going off of memory here, but I think the consensus safe draw down rate is 4% per year. That means $1M in retirement savings will give you about $40k per year to live on (not including things like social security). Depending on where and how you live, this might be sufficient. You’d have to plan for it though, which is my point.
- There are plenty of retirement calculators online to help with this. You enter your age, when you want to retire, the amount you’re saving, and it will tell you what your savings will be when you’re 65 (or whatever) and how long it will last at different draw down rates. Some will let you estimate things like rate of return too. Be realistic.
- Realize that the closer you get to retirement, the more conservative your investments should be. To paint with a very broad brush, low risk=low reward, high risk=high reward. The further you are from retirement, the longer you have to recover from a downturn. Look at the retirement date targeted funds - they move over time from a more speculative set of investments to a more reliable one. What I’m saying here is that you’ll read things about being able to plan around a 10% rate of return. That’s the average for a stock based portfolio, and it can swing around quite a bit. Individual stocks have a higher risk than an s&p index fund, and the index fund will have a higher risk than a conservative, income-oriented fund. Remember that when you’re using those retirement planning web sites.
Send your extra cash to me. I’ll invest it for you. No strings. My track record is as solid as FTX. You can’t lose.
