Investing in the overall growth of a stable and productive nation is better than letting it sit in a bank, imho.
I have a money-box. It is full to the brim of coins and bank-notes left over from travels in SE Asia. I think my net-wealth might be up to around $7.23 by now.
My entire portfolio is heavily invested in debt.
Apart from IRA\401k I don’t.
My retirement plan options are very good, so I max out contributions to that. It’s invested about 60% U.S. equities (running the gamut on size), 35% international equities, and 5% bonds. I max out my IRA contribution each year and convert it to a Roth IRA. That is in a Vanguard Target date retirement fund dated about five years after i plan to retire. That means it will stay tilted towards equities for longer than it would with a shorter date. I don’t know if I’ll ever need to draw from it so i can take a little extra risk.
I estimate my spending, look at my after-tax income, and put everything else into Vanguard Total Stock Market through regular monthly purchases. When my income goes up, i increase the amount of my monthly contribution.
I have a cash reserve in a savings account that is a combination of my intended cash reserve, money that I budgeted to spend but haven’t, and funds left over from my house down payment fund. It’s been essentially dead money for several years but I keep it around because I’ve also been shopping for an investment property or business. I’ve missed out on a couple good ones and rejected lots of others. I plan to invest this in a Treasury portfolio soon. Municipal bonds would make more sense but my job, for reasons I won’t explain, makes it very inconvenient for me to invest in munis.
What makes it safe? Safety isn’t my only concern. I want sufficient returns to accomplish my financial objectives and i believe this approximates the portfolio that will accomplish them. It does rely on my fundamental faith that companies will continue to innovate and profit in the long run despite continuous changes in the economy. That’s been a great bet since World War II. I also have enough liquid reserves to withstand pretty severe market turbulence so I don’t worry about short-term fluctuations. Mrs. Charming and Rested shares my belief that we should live below our means and plan for our financial independence. A lot of safety comes from the two of us working towards the same goal. Her portfolio is very similar to mine.
I have a house but that’s a consumption item, not an investment.
Ah yes, I’ve heard of this “bank”. They tell me it is an extremely convenient place for poor people to put their money that hasn’t been invested properly.
Tired and Cranky, that sounds close to what I did and am pleased to report that it has worked well so far. I too invested salary increases and bonuses before spending them. Good scheme.
RMDs start next year after 10 years of retirement - that will be the first significant withdrawals from retirement accounts - have been living on taxable savings.
Since I’d guess you have almost no taxable income now, why didn’t you take just enough out of the pre-tax savings so that you could keep your taxes low? I’ve converted mine into a Roth so they’ll grow tax free from now on. That will reduce my RMD in four years.
I have been doing just that.
I have shifted pre-tax money to HSA accounts and to a Roth IRA, up to my estimated RMD tax rate.
By “invested properly”, you mean invested in a market that crashes every two or three decades, wiping out the savings of “poor people”, but leaving you rich people happy and afloat. Like when everybody’s pensions were stolen (with impunity), or when they discovered that owning your own home is the American Nightmare.
Meanwhile, heard about any uncompensated bank failures in your lifetime?
Okay, cool. It sounded like you were forced to do it already.
Truly poor people don’t have money in the market. They suffer because of the job loss that comes with a crash, but they’d suffer no matter where they put their money.
People who got wiped out in the last recession are those who panicked and sold at the bottom. Those lucky enough to have kept our jobs and kept investing did pretty well.
And if you really want safety, why not invest in T-bills or something like that, which pay better than banks and are just as safe.
A lot of people who have only a few thousand in savings don’t like to put it where they can’t get it immediately. Like, if their beater car goes up in smoke and they need a couple thousand right away to buy a replacement. Or they are hit with a big copay when they thought they had health insurance. Of they have to buy a new fridge before the frozen contents thaw without warning. High interest comes at the price of accessibility when you need it, which for the non-rich, is the only point of having it.
Pretty much everyone says that you should have a reserve to use as a cushion, so if all you have is a few thousand in savings, that’s not really available for investment.
It’s not my responsibility to grow a stable and productive nation.
Yah, jtur88, you’re talking about emergency savings. That is distinct from investing.
Mostly index funds. Some stock picks. Some dividend stocks. Some bonds. Some cash. 529s for college. 401ks and IRAs for retirement. Two businesses.
between 10-12% annual over lifetime, last I checked on the non-earmarked stock/bond portfolio
Lots of money and investment over time. The second is how you start. Eventually, you hope to get to the first where its “oh, I lost $20k on the stock market today…oh well, its a virtual loss - hopefully it will come back before I need to sell it…and that means stocks are likely on sale - is there anything I’ve had my eye on?”
What have you invested in for 3 years or longer? - 457 (like a 401 for non-profits and municipalities) - Most is in funds, but a bit is in a money market fund because I’m close to retiring and I need to do at least one cautious thing.
What is the return % over time? - I don’t look. It’s going to go up and down. The money market fund has a guaranteed return of about 4%, I think.
What makes the overall strategy safe to you? - I don’t think of it as safe so much as my best shot. I’ve made sure to keep on good terms with my grown children. And the house isn’t under water any more. There’s some in savings, too.
Heavily tilted towards value and small cap using index funds and ETFs on the equities side, but overall I have a relatively small allocation to equities for someone my age.
Valuation levels are extraordinarily high at the moment so I think it’s wise to avoid growth stocks altogether.
At 57, I’m maybe two years away from retirement. The typical investment advice for people my age is to be more into bonds and less stocks, but my wife and I have been saving aggressively for 35 years, and even though we’re pretty much all stocks, we have enough that we can weather a drop in values without limiting our lifestyle, so I’m staying in stocks.
We have a lot in ETFs based on the S&P500, too much in Apple and Google, and we own our house and a lake house free and clear, plus own a lake lot that we may build on.
I can’t sell off the Apple and Google because I can only take so much capital gains each year without being catapulted into a high tax bracket.
From my simulations, the stock market can drop 50% next year and then grow at only 2% above inflation from here on out, and we still have more than we can spend. In my opinion, the advice to be more into bonds is to protect you from the risk of a stock market drop, but if you have enough, it’s not an issue.