Paid off loans, funded my backdoor Roth IRA, now what?

[napoleondynamite]

Hey Everyone,

Total newbie in need of some advice.

I recently paid off my student loans. I narrowly dodged a financial adviser, nearly signed up with him to help me setup my retirement accounts. But found this site and am trying to navigate on my own.

I opened a Vanguard account and bumbled my way through the backdoor Roth IRA process.

My question is, I have $20k to invest. What do I put it in? A 401K? Sorry for the stupid question. I just don't know what my next investment should be..I'm thinking long-term and fairly conservative here. I'm 41 with a meager employer-matched 401k that I have max'd out for 2 years, but otherwise have zero investments. So I want to start socking away probably $20k a month for at least the next couple of years. Where do you recommend I put it? I don't know what type of an account.

If there is a particular thread or link on the website that answers this to get me started, please point me in the right direction.

Thank you!

[The White Coat Investor]

What does your written financial plan say you should do with money you have to invest?

https://www.whitecoatinvestor.com/how-to-write-an-investing-personal-statement/

The general strategy is to figure out how much you want/need to save for retirement, determine the best types of accounts available to you to invest that in, decide on an asset allocation, and then select investments to give you that asset allocation.

Are you employed? Does your employer offer a 401(k)? Are you self-employed? If so, then you can open up an individual 401(k). But if you've maxed out all available accounts but need to save more to reach your goals, then you invest in a taxable account. You can open that up at Vanguard by just purchasing a mutual fund.

Today's blog post is perfect for you:

https://www.whitecoatinvestor.com/what-to-do-if-all-you-have-is-a-401k/

 

[artemis]

First, I'd check to see what options your current employer offers as far as retirement savings go.  I'd also check to see if you're eligible to open a health savings account.  Once you've maxed out a backdoor Roth, your employer-offered retirement plan options, and a health savings account, you're looking at investing in taxable accounts (which you could easily do through Vanguard) or possibly real estate.  A lot depends on what you're planning to use the investment money for.   For long-term investing, I'd put the money going into your taxable account into either Vanguard Wellington or a Bogleheads'-style 3 fund portfolio.  But first I'd make sure I had $50k or so in cash (perhaps a CD ladder) for emergencies, and I'd consider saving up for a down payment on a house or condo once I know I'm likely to be in the area for the long term (and that's money you probably don't want to have in the stock market, but invested more conservatively).

So, what are your near-term and long-term goals?

[napoleondynamite]

Thanks guys. I have max'd my employer 401k this year and also fully funded my HSA. I also have my cash reserves - ironically, exactly $50k.

I'm definitely thinking long-term. I'll look into the Vanguard Wellington and Boglehead's.

Thank you!

[hightower]

napoleondynamite wrote:

Thanks guys. I have max’d my employer 401k this year and also fully funded by HSA. I also have my cash reserves – ironically, exactly $50k.

I’m definitely thinking long-term. I’ll look into the Vanguard Wellington and Boglehead’s.

Thank you!

Click to expand...

Great, so if you've already funded a 401k, Backdoor Roth, and HSA, then your next move is to open a taxable brokerage account.  I have mine at Vanguard, but you can go anywhere.  Once the account is open and the money is there, then it's time to decide how to allocate it across various investments.  That's where Boglehead's can help.  I read through their introductory pages and read some of the recommended books on their site and WCI when I was starting out.  There's a million different ways to do it, just have to pick something sensible and stick to it.  WCI's book is great for your purposes as well.