this post was submitted on 11 Nov 2023
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Personal Finance

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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.

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[–] NoiseColor@startrek.website 1 points 2 years ago (2 children)

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.

[–] Frozengyro@lemmy.world 0 points 2 years ago

That is way too much into basically unproved investments and gambling. Maybe put 2-5% into it if you really believe in it, but be aware the long term investment potential isn't really known (30-50 years).

[–] tburkhol@lemmy.world 0 points 2 years ago (1 children)

TL;DR: index funds and tax-protected accounts.

Index funds because none of us (including the professionals who study them all day long) know enough about individual companies and the future of the economy to pick winners consistently. Investing in "everything" averages out the winners and losers and gives you the natural growth of human activity.

Tax protected accounts because you'll make withdrawals at a time when your income is (presumably) lower, and deferring income to that time means deferring taxes to the lower tax bracket. In the US, tax protected accounts have special purposes: education, healthcare, retirement.

At 48, education is probably only relevant if you want to pay for kids' college, and that's what [https://www.irs.gov/taxtopics/tc313](529 plans) are for.

You are definitely coming to the point in life where, regardless of your general health, you will begin to incur healthcare costs. In the US, that's an incredibly complex topic, but one aspect to be aware is [https://www.healthcare.gov/glossary/health-savings-account-hsa/](Health Savings Account). You have to be on 'high deductible' insurance to qualify for these, so probably not empoyer-sponsored insurance, but if you're self-insuring through the marketplace, many of the lowest-premium plans qualify. HSA will let you save around $4000/year tax-deductible and tax-free, with the restriction that it can only be used for healthcare costs (not insurance premiums) until age 65, at which point the money becomes available for any purpose, still tax-free.

Retirement is probably you main long-term concern. If your employer offers a 401(k), you can put up to $22k in that every year. If your income is $42k, you pay $3200 in OASDI and around $1500 in Federal income tax. Putting $20k in a 401(k) will reduce your declarable income to $22k, your OASDI tax to $1700 and Federal tax to $0, effectively giving you an extra $3000/year to spend/save. 401(k) money is fully taxable when withdrawn, but if you have to withdraw $18k/year (1500/month) after retirement, that is still below the Federal tax threshold (depending on your social security benefits).

For sure, if your employer offers any kind of match to your 401(k) contributions, contribute at least enough to get all of that match. It's literally free money.

Non-employer retirement accounts are IRAs, either Traditional (tax deductible contributions, tax deferred withdrawals) or Roth (taxable contributions, tax free withdrawals), with $6500/year contribution limits. Roth makes retirement planning very easy, because however much you have saved is what you can spend, but they also mean paying taxes on that money today. In your case, at a marginal tax rate of (7.65+12) = 19.65%, that means $1280/year, where, as with the 401(k), it looks like your after-retirement tax rate will be around 0%, anyway. For most people who qualify, traditional IRA is the lower cost solution, even though it increases the after-retirement tax cost.

Finally, I'm not a pro, this is all just information I've picked up. If you're really unsure, it might be worth your peace of mind to find a fee-only financial advisor and pay them a few hundred dollars for a consultation. Think of it like therapy for your financial mental health. They'll give you completely boiler-plate advice, but they know all this stuff inside and out, and should be able to set you on a good path in just one meeting. Don't sign up for an annual contract.

[–] CarbonatedPastaSauce@lemmy.world 0 points 2 years ago (1 children)

I have heard you should make sure your financial advisor is a fiduciary. My understanding is they are legally required to advise you on things that are in your best interests.

[–] captainlezbian@lemmy.world 0 points 2 years ago

Max our employer contributions to 401k then use a managed plan that adjusts risk based on your age

[–] avguser@lemmy.world 0 points 2 years ago

The Personal Finance wiki from that other site has a Prime Directive flowchart that spells out how you should allocate windfalls. Here's the US flowchart but they have them for other countries with their respective finance programs.

In short, if you already are able to live off a smaller income, build an emergency fund so you don't go backwards, then pay your future self. Don't inflate your expenses unnecessarily because that just makes the goal of retirement cost more in the end.

[–] Jakdracula@lemmy.world 0 points 2 years ago (1 children)

Put that first $2k into an IRA before the end of the year.

[–] LemmyInRedditSux@lemm.ee 0 points 2 years ago (1 children)

Got it. Will do. This is the kind of advice I'm looking for because I don't understand anything about investing, all I know investing is the only way to get ahead in life. Roth IRA. Got it.

[–] Gap@lemmy.world 0 points 2 years ago

If you have a choice on what stonks you invest in: pick an index fund. Don't go for single stocks.