38 years old that just started a job last year that will leave me with a pension and SS when i retire. Currently make 50k a year and will top out at 75k by the time i retire. So far i have zero invested in retirement other than my pension contributions, but i do have 30k sitting around collecting nothing. So the obvious question is what would you do with it? ROTH IRA? SP 500? neither? both?
Wed Jun 01, 2016 1:50 am
oldguy Senior Member
Cash: $ 715.00
Joined: 21 May 2006
quote: zero invested in retirement
$30k @ age 38, that's easy - invest in an SP500 Index Fund. That gives you the diversification of moat of the corporations in the US (and most of them have foreign divisions as well). The SP500 Index has averaged about 11%/yr (longterm) for over a century. Your $30k, @11%/yr, will be about $700,000 in 30 yrs.t
As for what account to keep it in - taxable, posttax (IRA), pretax (Roth) - that part isn't so important - ie, $700k is $700k no matter where it is. With an IRA/401k you pay the tax after you reach 70 1/2. With a Roth, you pay the tax first and put the remainder into the Roth. With a taxable account, you pay the tax first, then pay capital gains tax on the profit when/if you sell some.
As for calling it "retirement" - IMO that moniker has steered young people wrong for couple of decades. Before all of the government programs were invented, people like me invested in brokerage accounts to build our live savings & our family wealth. But now, the "govt retirement' accounts have scared off folks, they don't like having their money locked away until age 59 1/2. So they start late in life and only about 35% of workers even join those plans - not good for the future wealth of the nation. So it is good that you are asking these questions before you hit age 40, plenty of time to build up a million dollars before you retire.