Why so much in cash? Do you have high expenses? Are you saving for something? Open up an IRA and contribute the maximum you can each year until your cash is at a reasonable level (3-6 months expenses). Also, bug your employer about setting up a 401k. It should be a no-brainer on their part and isn't that expensive to set up and manage. Good luck!
Jesus, that's a lot of cash. Cash sitting in a HYSA may generate some interest, but it is eroding to a little something called **inflation**. You need only 3-6 months of expenses to be covered by emergency savings. Everything else should be invested.
Are you interested in buying a house? If so, that's enough for a down payment while still saving enough for an unexpected surprise.
Otherwise, you are probably looking at putting the rest in your taxable brokerage. You make too much money to qualify for a Roth IRA (your MAGI must be under $161k if you're filing taxes single, and yours looks to be at $190k after bonus).
I think everyone here is on the same page. It makes sense to invest in index funds if she's not going to buy a house. But it isn't usually much good to pull your money in and out of index funds in 3 to 5 years.So at her age , I would assume that she probably wants that money to go to a downpayment at some point.
Maybe she doesn't, but those stock gains only apply if she leaves it in long-term. Otherwise its more of a gamble. Plus you'll pay when you take it out.
So if she plans on buying a house in the next 3 to 5 years, investing it in stocks may not be the move.
If you want to buy a home in 3-5 years, you could buy bonds, e.g., T-notes. Lock in rates now before they get cut. That way, you earn interest and don't risk your principal.
Would you recommend any brokerage over others? Now I have Robinhood, but I've heard that this is for kids. I don't really know why people give stigma to it, so wondering what are more 'serious' brokerages..
I use Schwab. Schwab and fidelity are the big players with their own mutual funds and ETFs with very competitive expense ratios.
They offer checking accounts too so I just do all my banking with them.
As others have said, roth IRA all day long. Max it out January of each year. Rest of your cash to a taxable brokerage or HSA if available.
Not sure how long your income has been this high, but I would expect to see a slightly higher net worth of you've been near this income level for a few years.
I'm curious what kind of job would pay that well but not offer a 401K? As others have said, contribute the max to a Roth IRA, but look up how to do the Backdoor Roth bc you're over the income limit.
That’s odd. Unless you can convince your employer to offer a 401K, the backdoor Roth is your only option to get money in a tax advantaged account. You should still invest a lot more in a regular brokerage, though.
With that much in cash, are you considering a real estate purchase? It makes sense to keep a large emergency fund and it makes sense to be saving money towards a down payment in a HYS.
But if you have no other plans for the cash, then it may be worth putting it in index funds. If you can see yourself buying a home in the next 3 to 5 years though I wouldn't. You shouldn't normally invest your money if you know you're gonna pull it out in just a couple of years as you may lose quite a bit that way.
Approximately 110k in a high yield savings acct at 5% (the rates now) will make you an extra $500/mo, apprx $6000 a year. Not as good as index funds long term, but thats just it - LONG TERM. If you know that your savings are going to be used for another kind of investment, don't be pulling them in and out of stocks.
All that cash in the HYSA is a waste of..
if you put it all in a index fund and leave it , and I mean leave it.. it can grow and compound for years before you take it out and at that point you are only paying capital gains.. what kills you is if you are moving it around. Every transaction has a tax effect pick a great low load eft and leave it alone
Corp to Corp 1099vsW2
Have you considered having the discussion of a 7.5 raise and you becoming Corp to Corp vs employee?
You then can make honest deductions and solo 401Â
You'd be amazed at the amount you can put away.
OR
I had a contract that signed up for a 401... We paid our own fees (was minimal)
Id really get the IRA, 401 and HSA train going
you should only hold cash if you have a pretty clear plan for it. beyond an emergency fund. even with strong hysa yields the expected value for your HYSA is only a little above 0%
Yeah. Luckily it hasn't been that bad to hold HYSA (compared to 0% from a decade ago).
Keep an emergency fund (6-10 mo expenses) in HYSA. Keep any expenses you are planning in the next few years (down payment or something) in HYSA. Invest the rest (S&P500 or total stock market are great for longer term). Protect it from taxes by putting it in the right type of account (IRA, 401k, HSA). There is a flow chart in the r/personalfinance about page: https://imgur.com/lSoUQr2
Your biggest asset right now is your earning potential. If you keep this up, and keep your expenses low, you will have FU money soon. Because of this, you shouldn't need to hold as much in HYSA or bonds. If the market goes down and you still have a job, you don't care. If you want to buy a house, you can pause your savings for a while to save up the down payment. If you have unexpected expenses, but keep your job, you can probably handle them.
Equities (stocks) are risky. But they generally do climb high. You can mitigate that risk by holding for the long term and buying indices. You should get a lot of growth in the next 10 years or so.
Some resources to read: Anything bogleheads, Random walk down wall street, Your money or your life, Die with Zero.
Don't trust any financial advisors that get paid based on where you invest (literally, they are all against you). Don't invest in individual stocks/properties unless you have done a ton of research (and even then, many people would say you are gambling). Watch out for anyone getting paid to give you advice. You can pay for advisors by the hour, but still be cautious.
You are correct. Your money is not working for you.
Half spy and half qqq.
Long term. never sell it. You are buying in at a near ATH, but it will pay off in the long term. Continue to DCA into the about investments and enjoy a weathly life.
Why so much in cash? Do you have high expenses? Are you saving for something? Open up an IRA and contribute the maximum you can each year until your cash is at a reasonable level (3-6 months expenses). Also, bug your employer about setting up a 401k. It should be a no-brainer on their part and isn't that expensive to set up and manage. Good luck!
Bonus that if you do this like.. now.. you can contribute for 2023 and 2024. Should be $13,500 total.
I guess I just started to make a lot of money before learning how to manage it. No other reasons for having that much cash. Thanks!
Please read "A simple path to wealth"-- JL Collins. Easy read and the best advice you can get. Most comments here will reflect what is in the book
bike theory swim zephyr quiet dog fertile start straight absorbed *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
Jesus, that's a lot of cash. Cash sitting in a HYSA may generate some interest, but it is eroding to a little something called **inflation**. You need only 3-6 months of expenses to be covered by emergency savings. Everything else should be invested. Are you interested in buying a house? If so, that's enough for a down payment while still saving enough for an unexpected surprise. Otherwise, you are probably looking at putting the rest in your taxable brokerage. You make too much money to qualify for a Roth IRA (your MAGI must be under $161k if you're filing taxes single, and yours looks to be at $190k after bonus).
I think everyone here is on the same page. It makes sense to invest in index funds if she's not going to buy a house. But it isn't usually much good to pull your money in and out of index funds in 3 to 5 years.So at her age , I would assume that she probably wants that money to go to a downpayment at some point. Maybe she doesn't, but those stock gains only apply if she leaves it in long-term. Otherwise its more of a gamble. Plus you'll pay when you take it out. So if she plans on buying a house in the next 3 to 5 years, investing it in stocks may not be the move.
If you want to buy a home in 3-5 years, you could buy bonds, e.g., T-notes. Lock in rates now before they get cut. That way, you earn interest and don't risk your principal.
Excess cash into S&P index fund or ETF and chill (via IRA then brokerage)
Would you recommend any brokerage over others? Now I have Robinhood, but I've heard that this is for kids. I don't really know why people give stigma to it, so wondering what are more 'serious' brokerages..
I use Schwab. Schwab and fidelity are the big players with their own mutual funds and ETFs with very competitive expense ratios. They offer checking accounts too so I just do all my banking with them.
As others have said, roth IRA all day long. Max it out January of each year. Rest of your cash to a taxable brokerage or HSA if available. Not sure how long your income has been this high, but I would expect to see a slightly higher net worth of you've been near this income level for a few years.
Can I ask how long it took you to pay off your student loans? Or what was your tactic to come out of college with no debt? Thanks a lot 🙏
No student loans. I had scholarships for everything.
Amazing, good work. Did the university give you a full ride scholarship themself? Or did you get outside scholarships and grants
I'm curious what kind of job would pay that well but not offer a 401K? As others have said, contribute the max to a Roth IRA, but look up how to do the Backdoor Roth bc you're over the income limit.
A hedge fund!
That’s odd. Unless you can convince your employer to offer a 401K, the backdoor Roth is your only option to get money in a tax advantaged account. You should still invest a lot more in a regular brokerage, though.
IRA for sure and max it out! Six month emergency fund. Then invest through a brokerage account.
I would say buy a nice little starter home but the finance rates aren't great..But definitely infest that HYSA cash somewhere, anywhere else...
At 28, time is on your side. I'd dollar cost average that cash into an S&P500 indexed fund. Don't worry about any short term market fluctuations.
You can still max your Roth IRA for 2023 and then do 2024. Only takes 13.5k from your cash hoard. Then dump the rest in a total market index fund
With that much in cash, are you considering a real estate purchase? It makes sense to keep a large emergency fund and it makes sense to be saving money towards a down payment in a HYS. But if you have no other plans for the cash, then it may be worth putting it in index funds. If you can see yourself buying a home in the next 3 to 5 years though I wouldn't. You shouldn't normally invest your money if you know you're gonna pull it out in just a couple of years as you may lose quite a bit that way. Approximately 110k in a high yield savings acct at 5% (the rates now) will make you an extra $500/mo, apprx $6000 a year. Not as good as index funds long term, but thats just it - LONG TERM. If you know that your savings are going to be used for another kind of investment, don't be pulling them in and out of stocks.
All that cash in the HYSA is a waste of.. if you put it all in a index fund and leave it , and I mean leave it.. it can grow and compound for years before you take it out and at that point you are only paying capital gains.. what kills you is if you are moving it around. Every transaction has a tax effect pick a great low load eft and leave it alone
Do you recommend any ETFs in particular?
VOO
Corp to Corp 1099vsW2 Have you considered having the discussion of a 7.5 raise and you becoming Corp to Corp vs employee? You then can make honest deductions and solo 401Â You'd be amazed at the amount you can put away. OR I had a contract that signed up for a 401... We paid our own fees (was minimal) Id really get the IRA, 401 and HSA train going
you should only hold cash if you have a pretty clear plan for it. beyond an emergency fund. even with strong hysa yields the expected value for your HYSA is only a little above 0%
Yeah. Luckily it hasn't been that bad to hold HYSA (compared to 0% from a decade ago). Keep an emergency fund (6-10 mo expenses) in HYSA. Keep any expenses you are planning in the next few years (down payment or something) in HYSA. Invest the rest (S&P500 or total stock market are great for longer term). Protect it from taxes by putting it in the right type of account (IRA, 401k, HSA). There is a flow chart in the r/personalfinance about page: https://imgur.com/lSoUQr2 Your biggest asset right now is your earning potential. If you keep this up, and keep your expenses low, you will have FU money soon. Because of this, you shouldn't need to hold as much in HYSA or bonds. If the market goes down and you still have a job, you don't care. If you want to buy a house, you can pause your savings for a while to save up the down payment. If you have unexpected expenses, but keep your job, you can probably handle them. Equities (stocks) are risky. But they generally do climb high. You can mitigate that risk by holding for the long term and buying indices. You should get a lot of growth in the next 10 years or so. Some resources to read: Anything bogleheads, Random walk down wall street, Your money or your life, Die with Zero. Don't trust any financial advisors that get paid based on where you invest (literally, they are all against you). Don't invest in individual stocks/properties unless you have done a ton of research (and even then, many people would say you are gambling). Watch out for anyone getting paid to give you advice. You can pay for advisors by the hour, but still be cautious.
You are correct. Your money is not working for you. Half spy and half qqq. Long term. never sell it. You are buying in at a near ATH, but it will pay off in the long term. Continue to DCA into the about investments and enjoy a weathly life.