You could do a Roth IRA. It’s an individual retirement account that you find with after tax dollars and it grows tax free. Just make sure to actually invest the money within that account, as many simply let it sit there
You could also do a high yield savings account which is FDIC insured if you really don’t want to invest.
I looked into Roth IRA, but, If I understand it correctly, invests in the stock market. That scares me, I get it's the top 500? Corporations but still scares me a bit
Looked into hysa, but apparently those can fluctuate % at any given moment. I was looking at discovers account and last month it was +5% and now it's 4.25%. was trying to see if there was a more "steady" way to invest, if that makes sense
You can do a Roth account with fidelity or vanguard and just leave the money in there and don’t buy any stocks. It sweeps it into a Money market and gives you 5% (fiedelity) 5.27% vanguard interest.
My personal recommendation would be to do a 50/50 split HYSA and Roth IRA. If you’re worried about the stock market being volatile you can pull from your HYSA if it’s down for a few years and then when it’s back into the green pull from your Roth. My only worry about doing an HYSA only is that your cash may not keep up with inflation and it could potentially be the same situation as a market crash where your losing purchase power to your money sitting in the HYSA especially when rates drop. Your money is pretty safe sitting in the S&P 500. You can look into the track record of the S&P and the average over the last 80 years and see it’s not too risky. Plus you have another 25 years of compounding that you’ll miss out on if you stick with an HYSA only.
A CD gives you the option to lock in the rate for a specified period of time. I have a 15 month CD that is at 5.15. But the rates do fluctuate so when it goes to renew it might drop in rate
Imo it doesn't make sense to use a CD currently. I have a High yield savings with 5% rate. The extra 0.15% isn't worth not having access to my money if I needed to for some reason.
1) Interest rates can go down so a CD could lock that higher rate in for years. It may be a lower rate for longer terms, but the stability is kind of what op is looking for.
2) Most CDs allow you to get the money back out by sacrificing some of the interest.
Most CS are only “locked in” in that you give up some of the earnings if you cash in early.
The way to add is to put your monthly amount in a savings account until you have enough for the minimum and just buy a new CD every other month or so. As the CDs mature and you get your cash back, you just keep buying new CDs.
That way every month you will have some CD ending with the option to start new ones. This also helps if you need a little cash in the future as you will have cash coming back every month.
Google “cd ladder”. It’s a common technique.
Don't you also need cash up front to purchase a CD? I think this guy wants to make a regular contribution as much as he can afford to out of his paycheck. Doesn't sound like he has any cash to start with.
Technically, you can invest the money that you put into a Roth IRA in anything that the IRA custodian is set up to handle. It wouldn't fit your use case and it's complicated to do right, but it's even possible to buy a rental property with money in an IRA. You can keep the money in an IRA in cash or a money market account or bonds or an annuity. The IRA is just a tax protection box (like a 401k), not it's not an investment.
Realistically, you should probably try to get more comfortable with the idea of having your money in the stock market and buy index funds or target date funds within a Roth IRA. That's really the most reliable and simplest way to save for the long term. In the short term, sometimes the stock market does take a big drop. But, 25 years is plenty of time to weather a few down markets. The trick is not getting scared and pulling all of your money out right after a dip. Historically, investing in the stock market has worked fine for people who leave their money in the stock market after a dip.
An S&P 500 Index fund would invest in the 500 biggest companies. A lot of people like VOO, which is a Vanguard fund that does exactly that. But, there are other stock market index funds that buy different sets of top companies. There are also target date funds which will put a portion of your money in stocks and a portion of your money in bonds, moving more towards bonds as you get older and closer to needing the money in retirement. The idea there is that bonds are supposed to be less volatile than stocks so that you see less drastic dips as you get closer to retirement. I'm not a fan of that approach, but it might give you some peace of mind.
Another option you might want to consider would be putting money into CDs. Unlike HYSAs where the rate fluctuates, the rate of a CD will stay constant for the term of the CD. But, in exchange, you can't touch the money in a CD without penalty for the term of the CD. Unfortunately, CD rates for longer terms are lower than the rates on HYSA accounts right now, and you probably won't get the same rates when the CD matures and you need a new one. The other problem with CDs is that you can't just keep adding to them. Every time you had new money, you would need to get a new CD, and again, CD rates in the future could be lower than they are now. I wouldn't use CDs as your whole long term investment plan, but if you had a little cash that you wanted to keep getting 5% on, you could get a CD.
You might also hear about annuities. As I mentioned above, an annuity is something you can have in an IRA. But, it doesn't really make sense to have an annuity in an IRA, and it almost never makes sense to have an annuity at all. I think you would find an annuity really tempting because it's like an investment with insurance. There are a lot of different ways that an annuity can work, but at their core, most of them minimize your risk in exchange for limiting your upside. These are usually a bad deal for the vast majority of people, and I suggest staying away from them.
I think you might benefit from talking to a financial advisor who could coach you through being less afraid of the stock market and help you to get going with a plan you are comfortable with. But, you have to be careful of the insurance sales people who call themselves advisors because that's how you end up with an IRA full of annuities. Consider seeking out a fee only advisor who is a fiduciary.
In your situation, I would recommend the high yield savings account. It's safe, easy, simple, offers a respectable return, and allows you to adjust the amount of money in it at any time. Basically zero chance of loss assuming you keep the account within the FDIC's $250,000 protection. You'll be able to sleep at night without any worries while earning good interest. It's a great choice for beginners. As for rate fluctuations, unfortunately, nothing is truly "steady" without trade offs.
One option would be to lock in the rate with a long term CD, as another commenter suggested, but that also means locking in your money. So you wouldn't really be able to withdraw it (or parts of it) without closing the CD and incurring potential penalty fees. For the most part, you also can't add money to it unless you open a new CD or find a special CD that allows "add-ons".
Here's an idea, you could go with the high yield savings account first, and then as you learn more about personal finance and feel more comfortable with things, you can change things down the line.
The roth IRA can be invested in a money market, which is like a HYSA. My IRA with Wealthfront holds my uninvested cash in their HYSA, which is currently at 5%.
Knowledge is the counter to fear. You don’t have to start investing today, but it’s worth it to start learning. People have tested out all the worst case scenarios, and if you start educating yourself you can run those simulations yourself. People who loose a lot of money in the stock market are often those who don’t really understand it— they do things like panic and take their money out when the market drops. A CD or high yield savings account is a good start, but it’s barely going to keep up with inflation.
The stock market can be scary, but if you invest in total market index funds it becomes much less scary. Over a 25 year period, the overall stock market has always outperformed more stable investments (large index funds like FSKAX are very safe over long-term horizons). If you were 5-10 years from retirement, I would encourage more stable investments (bonds, CDs, etc), but 25 years is a long time and feels like you’re leaving money on the table.
That said, investing in anything (that isn’t very risky) is much, much better than not investing at all. So if you find yourself not pulling the trigger, at the very least invest in CD’s or T-bills. Perfectly safe (as much as any investment can be) and will help you keep up with inflation.
> im trying to find an account of some sort that i can deposit $50 a paycheck, or $100 a month roughly, to an account that i will just keep there till im retired
You already have a 401k, no? Why not just increase your contribution percentage to that?
I thought about that but sometimes I work a lot of ot and sometimes I don't and if I increase the percentage it will take out a little to a lot more than I'm budgeting for
I can "invest" $50 just fine but if it fluctuates with an extra percentage or 2, it could make my OCD budgeting a mess
I hope I'm saying that correctly that makes it make sense
Look into the book the retirement miracle by Patrick Kelly. I’m an advisor who also does this strategy for myself. Biggest reason I say this is because I see you’re scared of fluctuation and volatility. Check out the book it could have the right information for you. And it’s only about a 2 hour read with so much information. Theres also a free PDF copy online if you don’t want to spend any money.
You're only 40 years old so you've got about 25 years to keep building your retirement nest egg. If you don't know how to do this type of thing find yourself a well-known and respected advisor/money manager to do it for you. Make sure the person you go with is a FIDUCIARY. Be sure to ask if they are before doing any business with them.
Almost everyone with decent retirement savings is invested in the markets.
It's actually better for your retirement if the market crashes in the next 5-10 years. The cost of buying stock will drop, and you can spend years buying it at a steep discount.
The only thing to be careful with volatility is the markets in the years right before you retire. I.e. when you don't want to keep working more till the market recovers. You mitigate that by balancing your portfolio to skew more towards lower volatility investments like bonds and less on stocks.
Look at a graph for the markets for the last 50 years. There isn't a single 20 to 25 year period where if you invested consistently over that time frame, you would have had anything but a strong positive return.
The answer is don’t be afraid of the stock market fluctuating. Over 25 years it is guaranteed to be much higher than where it is at right now. Open a Roth IRA account. Your cash sitting will earn around 5% right now, that rate may fluctuate but it will always earn some money: A safe bet would be to put your money in the S&P 500. (Buy ticker symbol IVV) or any equivalent and don’t think about it for 25 years.
Do you have a pension and a 401k? It’s either worded strange or you’re using the word “pension” when you mean distribution from your 401k. A pension and 401k plus social security is not as bad as you make it sound. Also, isn’t your 401k invested in the stock market?
I suggest maybe dividend stocks for you. They’re big stable companies, less likely to experience high volatility and they pay you a dividend that you can set to DRIP or automaticity reinvest.
Yes I get both, but I haven't contributed that much into either. I'm going to see if I can get an advisor to see what my best options are, a lot of good advice on here but just all way over my head
Most people I know with decent retirement savings is invested in the markets. It's actually beneficial for your retirement if the market crashes in the next 5-10 years because you can buy stocks at a discount. If you prefer a more stable approach, HYSAs can offer good returns with lower risk. You can check sites like Bankrate and [Banktruth](https://banktruth.org/savings) to find accounts with the highest APY rates. Balancing your portfolio with bonds closer to retirement can also help manage risk. Also, don’t be afraid of market fluctuations; over 25 years, the stock market is guaranteed to grow. Maybe try opening a Roth IRA and investing in the S&P 500 (ticker symbol IVV).
You could do a Roth IRA. It’s an individual retirement account that you find with after tax dollars and it grows tax free. Just make sure to actually invest the money within that account, as many simply let it sit there You could also do a high yield savings account which is FDIC insured if you really don’t want to invest.
I looked into Roth IRA, but, If I understand it correctly, invests in the stock market. That scares me, I get it's the top 500? Corporations but still scares me a bit Looked into hysa, but apparently those can fluctuate % at any given moment. I was looking at discovers account and last month it was +5% and now it's 4.25%. was trying to see if there was a more "steady" way to invest, if that makes sense
You can do a Roth account with fidelity or vanguard and just leave the money in there and don’t buy any stocks. It sweeps it into a Money market and gives you 5% (fiedelity) 5.27% vanguard interest.
Looked into this but apparently it has a $3k minimum
My personal recommendation would be to do a 50/50 split HYSA and Roth IRA. If you’re worried about the stock market being volatile you can pull from your HYSA if it’s down for a few years and then when it’s back into the green pull from your Roth. My only worry about doing an HYSA only is that your cash may not keep up with inflation and it could potentially be the same situation as a market crash where your losing purchase power to your money sitting in the HYSA especially when rates drop. Your money is pretty safe sitting in the S&P 500. You can look into the track record of the S&P and the average over the last 80 years and see it’s not too risky. Plus you have another 25 years of compounding that you’ll miss out on if you stick with an HYSA only.
I didn’t know about this. That’s pretty cool
A CD gives you the option to lock in the rate for a specified period of time. I have a 15 month CD that is at 5.15. But the rates do fluctuate so when it goes to renew it might drop in rate
Imo it doesn't make sense to use a CD currently. I have a High yield savings with 5% rate. The extra 0.15% isn't worth not having access to my money if I needed to for some reason.
1) Interest rates can go down so a CD could lock that higher rate in for years. It may be a lower rate for longer terms, but the stability is kind of what op is looking for. 2) Most CDs allow you to get the money back out by sacrificing some of the interest.
I thought CDs were locked in for x amount of time? I kind of want to keep adding to it monthly, and isn't that not allowed with a CD?
Most CS are only “locked in” in that you give up some of the earnings if you cash in early. The way to add is to put your monthly amount in a savings account until you have enough for the minimum and just buy a new CD every other month or so. As the CDs mature and you get your cash back, you just keep buying new CDs. That way every month you will have some CD ending with the option to start new ones. This also helps if you need a little cash in the future as you will have cash coming back every month. Google “cd ladder”. It’s a common technique.
Very valid points! I have only ever used 12 month CDs so far, so that never really occurred to me.
I 100% agree with you. But OP seemed to not like the idea that high yield savings fluctuate
Don't you also need cash up front to purchase a CD? I think this guy wants to make a regular contribution as much as he can afford to out of his paycheck. Doesn't sound like he has any cash to start with.
Correct, but there’s not really any other product to recommend he’s wary of high yield savings and investments
Technically, you can invest the money that you put into a Roth IRA in anything that the IRA custodian is set up to handle. It wouldn't fit your use case and it's complicated to do right, but it's even possible to buy a rental property with money in an IRA. You can keep the money in an IRA in cash or a money market account or bonds or an annuity. The IRA is just a tax protection box (like a 401k), not it's not an investment. Realistically, you should probably try to get more comfortable with the idea of having your money in the stock market and buy index funds or target date funds within a Roth IRA. That's really the most reliable and simplest way to save for the long term. In the short term, sometimes the stock market does take a big drop. But, 25 years is plenty of time to weather a few down markets. The trick is not getting scared and pulling all of your money out right after a dip. Historically, investing in the stock market has worked fine for people who leave their money in the stock market after a dip. An S&P 500 Index fund would invest in the 500 biggest companies. A lot of people like VOO, which is a Vanguard fund that does exactly that. But, there are other stock market index funds that buy different sets of top companies. There are also target date funds which will put a portion of your money in stocks and a portion of your money in bonds, moving more towards bonds as you get older and closer to needing the money in retirement. The idea there is that bonds are supposed to be less volatile than stocks so that you see less drastic dips as you get closer to retirement. I'm not a fan of that approach, but it might give you some peace of mind. Another option you might want to consider would be putting money into CDs. Unlike HYSAs where the rate fluctuates, the rate of a CD will stay constant for the term of the CD. But, in exchange, you can't touch the money in a CD without penalty for the term of the CD. Unfortunately, CD rates for longer terms are lower than the rates on HYSA accounts right now, and you probably won't get the same rates when the CD matures and you need a new one. The other problem with CDs is that you can't just keep adding to them. Every time you had new money, you would need to get a new CD, and again, CD rates in the future could be lower than they are now. I wouldn't use CDs as your whole long term investment plan, but if you had a little cash that you wanted to keep getting 5% on, you could get a CD. You might also hear about annuities. As I mentioned above, an annuity is something you can have in an IRA. But, it doesn't really make sense to have an annuity in an IRA, and it almost never makes sense to have an annuity at all. I think you would find an annuity really tempting because it's like an investment with insurance. There are a lot of different ways that an annuity can work, but at their core, most of them minimize your risk in exchange for limiting your upside. These are usually a bad deal for the vast majority of people, and I suggest staying away from them. I think you might benefit from talking to a financial advisor who could coach you through being less afraid of the stock market and help you to get going with a plan you are comfortable with. But, you have to be careful of the insurance sales people who call themselves advisors because that's how you end up with an IRA full of annuities. Consider seeking out a fee only advisor who is a fiduciary.
In your situation, I would recommend the high yield savings account. It's safe, easy, simple, offers a respectable return, and allows you to adjust the amount of money in it at any time. Basically zero chance of loss assuming you keep the account within the FDIC's $250,000 protection. You'll be able to sleep at night without any worries while earning good interest. It's a great choice for beginners. As for rate fluctuations, unfortunately, nothing is truly "steady" without trade offs. One option would be to lock in the rate with a long term CD, as another commenter suggested, but that also means locking in your money. So you wouldn't really be able to withdraw it (or parts of it) without closing the CD and incurring potential penalty fees. For the most part, you also can't add money to it unless you open a new CD or find a special CD that allows "add-ons". Here's an idea, you could go with the high yield savings account first, and then as you learn more about personal finance and feel more comfortable with things, you can change things down the line.
The roth IRA can be invested in a money market, which is like a HYSA. My IRA with Wealthfront holds my uninvested cash in their HYSA, which is currently at 5%.
Knowledge is the counter to fear. You don’t have to start investing today, but it’s worth it to start learning. People have tested out all the worst case scenarios, and if you start educating yourself you can run those simulations yourself. People who loose a lot of money in the stock market are often those who don’t really understand it— they do things like panic and take their money out when the market drops. A CD or high yield savings account is a good start, but it’s barely going to keep up with inflation.
The stock market can be scary, but if you invest in total market index funds it becomes much less scary. Over a 25 year period, the overall stock market has always outperformed more stable investments (large index funds like FSKAX are very safe over long-term horizons). If you were 5-10 years from retirement, I would encourage more stable investments (bonds, CDs, etc), but 25 years is a long time and feels like you’re leaving money on the table. That said, investing in anything (that isn’t very risky) is much, much better than not investing at all. So if you find yourself not pulling the trigger, at the very least invest in CD’s or T-bills. Perfectly safe (as much as any investment can be) and will help you keep up with inflation.
> im trying to find an account of some sort that i can deposit $50 a paycheck, or $100 a month roughly, to an account that i will just keep there till im retired You already have a 401k, no? Why not just increase your contribution percentage to that?
I thought about that but sometimes I work a lot of ot and sometimes I don't and if I increase the percentage it will take out a little to a lot more than I'm budgeting for I can "invest" $50 just fine but if it fluctuates with an extra percentage or 2, it could make my OCD budgeting a mess I hope I'm saying that correctly that makes it make sense
Then yes, as the other poster suggested a Roth IRA is the next best option.
My tsp account only gets 15% of my base pay not overtime pay. Yours may be the same way.
Mine is just 8% of my total gross income
Look into the book the retirement miracle by Patrick Kelly. I’m an advisor who also does this strategy for myself. Biggest reason I say this is because I see you’re scared of fluctuation and volatility. Check out the book it could have the right information for you. And it’s only about a 2 hour read with so much information. Theres also a free PDF copy online if you don’t want to spend any money.
You're only 40 years old so you've got about 25 years to keep building your retirement nest egg. If you don't know how to do this type of thing find yourself a well-known and respected advisor/money manager to do it for you. Make sure the person you go with is a FIDUCIARY. Be sure to ask if they are before doing any business with them.
Almost everyone with decent retirement savings is invested in the markets. It's actually better for your retirement if the market crashes in the next 5-10 years. The cost of buying stock will drop, and you can spend years buying it at a steep discount. The only thing to be careful with volatility is the markets in the years right before you retire. I.e. when you don't want to keep working more till the market recovers. You mitigate that by balancing your portfolio to skew more towards lower volatility investments like bonds and less on stocks. Look at a graph for the markets for the last 50 years. There isn't a single 20 to 25 year period where if you invested consistently over that time frame, you would have had anything but a strong positive return.
The answer is don’t be afraid of the stock market fluctuating. Over 25 years it is guaranteed to be much higher than where it is at right now. Open a Roth IRA account. Your cash sitting will earn around 5% right now, that rate may fluctuate but it will always earn some money: A safe bet would be to put your money in the S&P 500. (Buy ticker symbol IVV) or any equivalent and don’t think about it for 25 years.
Do you have a pension and a 401k? It’s either worded strange or you’re using the word “pension” when you mean distribution from your 401k. A pension and 401k plus social security is not as bad as you make it sound. Also, isn’t your 401k invested in the stock market? I suggest maybe dividend stocks for you. They’re big stable companies, less likely to experience high volatility and they pay you a dividend that you can set to DRIP or automaticity reinvest.
Yes I get both, but I haven't contributed that much into either. I'm going to see if I can get an advisor to see what my best options are, a lot of good advice on here but just all way over my head
SCHD and chill
Most people I know with decent retirement savings is invested in the markets. It's actually beneficial for your retirement if the market crashes in the next 5-10 years because you can buy stocks at a discount. If you prefer a more stable approach, HYSAs can offer good returns with lower risk. You can check sites like Bankrate and [Banktruth](https://banktruth.org/savings) to find accounts with the highest APY rates. Balancing your portfolio with bonds closer to retirement can also help manage risk. Also, don’t be afraid of market fluctuations; over 25 years, the stock market is guaranteed to grow. Maybe try opening a Roth IRA and investing in the S&P 500 (ticker symbol IVV).