Advice on Finances/Retirement for the Future

RaisedAmerican
Contributor

Hi all!

 

I am looking for some recommendations on where to put my money so that it can be beneficial to me without just sitting in a checking account. Currently, I have two checking accounts, one where I basically put my savings in and the other I use for everyday purchases and monthly living expenses.

 

I have about $20,000 in my "savings" checking account that it getting a 4% interest rate on the balance. I also have a Roth IRA that was just opened in the last 12 months that has about $1,700. My questions are, once I max the annual contribution of $6,000 where would you suggest I invest or "store" some other money so that it isn't just sitting in my checking account? 

 

Lastly, I feel that having $20,000 sitting in my checking is not taking advantage of the full potential of what my money could be doing for me? Ideally, how much should I have sat aside saved and what % would you suggest taking out of each paycheck to invest/save? My 6-month expenses are about $7,000-7,500. A little background info about me is that I'm 19, debt-free, have 3 years until I graduate college, and my investments are geared towards long-term growth with a 9/10 risk tolerance.

 

Thanks in advance!


Most Helpful

@RaisedAmerican, first off, excellent job! You realize the importance of setting yourself up. Second, just a friendly USAA member who reads up alot on this and I am in no way licensed or a qualified financial planner, so take what I say with a grain of salt. SO here goes my thoughts.....after years of research and reading article after article on personal finance matters.

 

How much savings you have set aside is largely personal, but general rule of thumb is 3-6 months worth of monthly expenses. If you have a secure job, or low monthly expenses, then 3 months might be ok, but if your income is variable, then 6 months is better, but again, that is solely for you to decide what will help you sleep at night. 

 

Max your Roth IRA, if you can afford to do so, each year you let go by, is a lost year of what you could have put in. At your age, even a 6,000 contribution, making say 9% return would equate to $450,888.39 at age 67. This is if you never put another dime in again and just let it compound. Now because of inflation, that is not the same as having that money today, but as you can see, the earlier you start, the better. Contrast this with putting a one time 6,000 contribution at age 30 and it only grows to $167,560.34 at age 67. Big difference!

 

As for the rest, you can use an online bank like Ally or Marcus by Goldman Sachs to get a relatively decent return, or try your luck in a taxable account, depending on how much risk you are willing to take. You have to realize that over the long term, you will make out much better investing in stocks, but you have to be honest with yourself in what you are willing to lose. Most people are ok investing in stocks when it's riding high, but what if you lose 10-20% are you going to sell? Most people think not, but then again, this is why the average investor lags the indexs by around 2% annually, which is huge.

 

In closing, I recommend you do some research and soul searching and find a portfolio and risk profile that works for you and stick to it through thick and thin, keep your costs as low as you can, as it is one of the few things you can control. Maybe look into the boglehead three fund philosophy to keep it simple and then allocate as you see fit.

 

Sorry to throw so much at you, just love helping people where I can in this. Best of luck.

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6 REPLIES

Thank you for reaching out to us today @RaisedAmerican. I was able to locate your profile and will share your inquiries with a subject matter expert. Once reviewed they will contact you. We do appreciate your patience in advance. -Emily 

@RaisedAmerican, first off, excellent job! You realize the importance of setting yourself up. Second, just a friendly USAA member who reads up alot on this and I am in no way licensed or a qualified financial planner, so take what I say with a grain of salt. SO here goes my thoughts.....after years of research and reading article after article on personal finance matters.

 

How much savings you have set aside is largely personal, but general rule of thumb is 3-6 months worth of monthly expenses. If you have a secure job, or low monthly expenses, then 3 months might be ok, but if your income is variable, then 6 months is better, but again, that is solely for you to decide what will help you sleep at night. 

 

Max your Roth IRA, if you can afford to do so, each year you let go by, is a lost year of what you could have put in. At your age, even a 6,000 contribution, making say 9% return would equate to $450,888.39 at age 67. This is if you never put another dime in again and just let it compound. Now because of inflation, that is not the same as having that money today, but as you can see, the earlier you start, the better. Contrast this with putting a one time 6,000 contribution at age 30 and it only grows to $167,560.34 at age 67. Big difference!

 

As for the rest, you can use an online bank like Ally or Marcus by Goldman Sachs to get a relatively decent return, or try your luck in a taxable account, depending on how much risk you are willing to take. You have to realize that over the long term, you will make out much better investing in stocks, but you have to be honest with yourself in what you are willing to lose. Most people are ok investing in stocks when it's riding high, but what if you lose 10-20% are you going to sell? Most people think not, but then again, this is why the average investor lags the indexs by around 2% annually, which is huge.

 

In closing, I recommend you do some research and soul searching and find a portfolio and risk profile that works for you and stick to it through thick and thin, keep your costs as low as you can, as it is one of the few things you can control. Maybe look into the boglehead three fund philosophy to keep it simple and then allocate as you see fit.

 

Sorry to throw so much at you, just love helping people where I can in this. Best of luck.

View solution in original post

"I have about $20,000 in my "savings" checking account that it getting a 4% interest rate on the balance."

Where is this?  This is too good to be true.  Rates havn't been that high since the 90s.

Thought the same thing 😂
It’s a local/regional bank, ran a promotional period for a few months for the checking account. They discontinued the rate in December of 2018; however, I was grandfathered into the account. Has a few “qualifiers” such as using the debit for 10 POS’s per cycle, direct deposit, e-statements, the usual for a higher rate.

T-Mobile money does 4% on their checking up to $3000 with a recurring $200 monthly deposit but then again you have to be a T-Mobile phone subscriber also to get those benifits.