Sitting on $70,000 - what should I do?

[cluelesswithcash]

Hi everyone,

I am a 31-year-old female and have $70,000 sitting in a savings account with a APY of 1.05% 

I work for a company who puts 7% of my salary into a retirement plan annually.  That plan has $31,600 in it and I have a 403B where I have been putting 6% of my salary for last couple years.  That currently has $12,700 in it.  So this Voya account has about $44,000 total.  I have the Voya account setup to where it is being managed by Morningstar and my account says it has gotten a 1.5% return this year - this sounds low but I'm not sure if that is typical for this type of account?

I also have a traditional IRA through TD Ameritrade where I have been putting $5,500/year for last few years and have been using the money in there to buy stocks which probably hasn't been my smartest move (thinking maybe I should have been buying Mutual Funds?) - I've been buying stocks like Apple, Netflix, etc.  It currently has  $23,000 in it. 

My gross salary is $61,000 a year.  I manage to save $20,000/yr (plus the $5,500 that goes into the IRA) which I have been putting into my savings account. 

College debt has been paid off for several years.  No credit card debt.  No kids.

I don't know what to do with this cash that is sitting in my savings - and I also don't know if I can better manage my TD Ameritrade IRA account and Voya retirement account?  Not sure if anyone here has any experience/advice about that part.  I want to keep some money in the savings account for a rainy day, but I want to invest a good portion somewhere but I just don't know what to do, I am totally clueless.  Would like $25,000-$30,000 be a good starting investment amount, or should I go higher?  I also have no idea if I should be putting it into the TD Ameritrade account for them to manage it for me through Amerivest (which I believe is managed by Morningstar)?  I have been reading some of this forum and see a lot of advice about putting money into Vanguard.  What would you do with this cash in order to get high returns for retirement?  I also don't know if I should be playing the stock market with some of this money to try to make extra money...this may sound stupid but I literally have no clue.  I also am not sure if I should talk to a financial planner through TD Ameritrade - I know I could go to a branch and do that but am hesitant because I am unsure if I will get good advice - I don't know if their goal is to sway you into investing your money with TD Ameritrade so they get the fees, etc. or if there is a better place I could go to invest this cash and get advice that could be cheaper and have a better outcome for me (would this be Vanguard?).  I've never talked to a financial planner before so not sure what I should do or where I should go. 

I appreciate any help/advice you have to offer to a completely clueless person.

[CheapScholar]

I'm also sitting on a lot of cash - about 57K.  I like to save an emergency fund of 5-10K but it's ridiculous.  I expect to need a new furnace/AC at any possible moment, which justifies having some extra cash on hand.  But, yeah, I should probably invest at least 40K.

I'm too chicken to invest because I keep thinking a recession or correction is imminent.  My SO and I have over 100K in 403bs and mutual funds as it is, so it's not like we aren't in the market.

Anyone else waiting for a market correction/recession for a better buying opportunity?

[wenchsenior]

I'm also sitting on a lot of cash - about 57K.  I like to save an emergency fund of 5-10K but it's ridiculous.  I expect to need a new furnace/AC at any possible moment, which justifies having some extra cash on hand.  But, yeah, I should probably invest at least 40K.

I'm too chicken to invest because I keep thinking a recession or correction is imminent.  My SO and I have over 100K in 403bs and mutual funds as it is, so it's not like we aren't in the market.

Anyone else waiting for a market correction/recession for a better buying opportunity?

No, because that would be timing the market. Which doesn't work. If you are risk-averse, work out a dollar cost averaging strategy and start dumping the money into a fund that matches your risk profile on a regular basis (I do it every two weeks). 

[CheapScholar]

I agree that timing the market is historically a bad idea.  But I just feel stocks are inflated now because people had no where else to put their money the past few years.  And I think we'd all agree this political climate is quite unusual.  My spouse and I put about 4K a month into the market as it is (403b), just saying I don't feel too good about investing more than that until I see the first half of this year.

[Gunga Galunga]

So you have quite a bit going on here, and I'm going to respond based only on the info you've provided (i.e. assuming you're not intending to purchase a home soon, or some other large cash needs).

First step would be to decide how much cash you want to have on hand as an emergency fund. Some people want $5k, some want $100k, and others prefer to rely on HELOC as an E-fund. Let's assume you want $10k just sitting in savings "just in case".

You're left with $60k cash that needs invested. You're not currently contributing much to your 403b, so I would suggest maxing that out.

I would also suggest contributing to a Roth IRA rather than a traditional, since lowering your taxable income by another $14k/year (due to increased 403b contributions) will put you in a low enough tax bracket that i don't think you're getting much tax benefit out of the traditional. Debatable, I know, as many mustachians pay 0% in taxes after retirement, but in general Roth contributions are preferrable if you are in a lower tax bracket.

You've now increased your retirement savings by ~$14k/year (ignoring tax savings from higher 403b/losses from going roth instead of traditional). If you were saving $20k/yr before, then you should still be sitting pretty in that you will not need to dip into your E-fund to fund your lifestyle. This additional $5k/yr leftover would then be funneled into a brokerage account.

As for existing retirement accounts: I'm not familiar with what this Voya account is, but 1.5% is incredibly low for this past year where just about any index funds you would have been in would return 8-15%. Find out what investment options are available in this plan, and put it in the lowest cost (fees) large cap index fund. Same goes for your traditional IRA with TD. Find out what their low cost index options are, and move into those. Historically, picking stocks has proved to be a losing endeavor. I prefer Schwab for these accounts due to low cost options, many prefer Vanguard, and I'm not too familiar with where TD fits into this mix. I believe schwab and vanguard both give you access to real advisors too if needed.

Same thought would apply to the $60k you're now going to move into a brokerage account where it can actually earn money for you. In any event, the debate of which specific funds or stock/bond mix is a separate discussion, but as a starting point you'd be hard pressed to find many that would disagree with just getting into a low cost S&P 500 index fund as a starting point. Add some bond funds if you think those will hedge risk for you, or whatever else you might want to do, but this is just a suggestion to at least get your money in play in the right types of accounts.

[damyst]

I agree that timing the market is historically a bad idea.  But I just feel stocks are inflated now because people had no where else to put their money the past few years.  And I think we'd all agree this political climate is quite unusual.  My spouse and I put about 4K a month into the market as it is (403b), just saying I don't feel too good about investing more than that until I see the first half of this year.

What you're doing is textbook market timing, which, as you pointed out yourself, has historically been (and remains) a bad idea.
If you have spare funds, they should be invested. You can do DCA if it makes you feel better, but not because you "feel" that the market should be going this way or that way. You will never have more clarity than you have right this moment.

[marty998]

Guys... telling someone who is new to the market that "market timing is a bad idea" is not good advice.
 
I think it's a real disservice on this forum. It doesn't matter how many studies you have to back it up, it will not help people make that initial first step who are either clueless or who genuinely are scared that markets are high and due for a crash (which is why they haven't invested in the first place).

It may be easy for a seasoned investor to be dispassionate and emotionless about it but it's never going to be without trepidation for someone who hasn't bought their first stocks yet.

So for that reason I'm in favour of drip feeding it in over the course of 1-2 years, even if theoretically it's a sub-optimal outcome.

To Miss cluelesswithcash - what are your goals? Do you have a house/mortgage? Do you want one?

Are you looking to FIRE by renting and investing the surplus? Do you want to FIRE via Realestate or stocks? Or both?

For shares... please ignore financial planners. In your shoes I would place $8,000 a month into an S&P 500 Exchange Traded Fund (ETF) and reinvest the distributions. Keep it simple.

[Telecaster]

I don't know what to do with this cash that is sitting in my savings - and I also don't know if I can better manage my TD Ameritrade IRA account and Voya retirement account?  Not sure if anyone here has any experience/advice about that part.  I want to keep some money in the savings account for a rainy day, but I want to invest a good portion somewhere but I just don't know what to do, I am totally clueless.  Would like $25,000-$30,000 be a good starting investment amount, or should I go higher?  I also have no idea if I should be putting it into the TD Ameritrade account for them to manage it for me through Amerivest (which I believe is managed by Morningstar)?  I have been reading some of this forum and see a lot of advice about putting money into Vanguard.  What would you do with this cash in order to get high returns for retirement?  I also don't know if I should be playing the stock market with some of this money to try to make extra money...this may sound stupid but I literally have no clue.  I also am not sure if I should talk to a financial planner through TD Ameritrade - I know I could go to a branch and do that but am hesitant because I am unsure if I will get good advice - I don't know if their goal is to sway you into investing your money with TD Ameritrade so they get the fees, etc. or if there is a better place I could go to invest this cash and get advice that could be cheaper and have a better outcome for me (would this be Vanguard?).  I've never talked to a financial planner before so not sure what I should do or where I should go. 

I appreciate any help/advice you have to offer to a completely clueless person.

Short answer:   Open a brokerage account at Vanguard.  Put 80% in VTSAX and 20% in VBTLX.   Then relax and enjoy the rest of your day.

Long answer:  The majority of financial advisers are mutual fund salesmen who want to sell you crappy mutual funds.   At age 31 (congrats on the great savings, by the way!), you are a long term investor.   For long term investors, by the far the best thing you can do to maximize your future wealth is avoid fees associated with investment advisers and crappy mutual funds.  Over any reasonable time period, the 80/20 combo of VTSAX and VBTLX is almost guaranteed to outperform anything a financial adviser will sell you, and that's before the fees.   Simple and boring is the proven way to go.   

[wenchsenior]

Guys... telling someone who is new to the market that "market timing is a bad idea" is not good advice.
 
I think it's a real disservice on this forum. It doesn't matter how many studies you have to back it up, it will not help people make that initial first step who are either clueless or who genuinely are scared that markets are high and due for a crash (which is why they haven't invested in the first place).

It may be easy for a seasoned investor to be dispassionate and emotionless about it but it's never going to be without trepidation for someone who hasn't bought their first stocks yet.

So for that reason I'm in favour of drip feeding it in over the course of 1-2 years, even if theoretically it's a sub-optimal outcome.

To Miss cluelesswithcash - what are your goals? Do you have a house/mortgage? Do you want one?

Are you looking to FIRE by renting and investing the surplus? Do you want to FIRE via Realestate or stocks? Or both?

For shares... please ignore financial planners. In your shoes I would place $8,000 a month into an S&P 500 Exchange Traded Fund (ETF) and reinvest the distributions. Keep it simple.

Right. That's actually what I said.   My mother is nervous about the same thing (big drops or sudden corrections), so I've convinced her to just dump 200$ every two weeks into a fund at Vanguard that matches her risk profile (somewhat risk-averse).

[damyst]

Guys... telling someone who is new to the market that "market timing is a bad idea" is not good advice.
 
I think it's a real disservice on this forum. It doesn't matter how many studies you have to back it up, it will not help people make that initial first step who are either clueless or who genuinely are scared that markets are high and due for a crash (which is why they haven't invested in the first place).

It may be easy for a seasoned investor to be dispassionate and emotionless about it but it's never going to be without trepidation for someone who hasn't bought their first stocks yet.

So for that reason I'm in favour of drip feeding it in over the course of 1-2 years, even if theoretically it's a sub-optimal outcome.

You have a point. But I do think this forum ought to be educating people. Who else is going to do it?
If someone is prone to bad investor behaviour, they'll sell out of panic during a crash and lose money, whether or not they dollar-cost averaged.

[Gunga Galunga]

Guys... telling someone who is new to the market that "market timing is a bad idea" is not good advice.
 
I think it's a real disservice on this forum. It doesn't matter how many studies you have to back it up, it will not help people make that initial first step who are either clueless or who genuinely are scared that markets are high and due for a crash (which is why they haven't invested in the first place).

It may be easy for a seasoned investor to be dispassionate and emotionless about it but it's never going to be without trepidation for someone who hasn't bought their first stocks yet.

So for that reason I'm in favour of drip feeding it in over the course of 1-2 years, even if theoretically it's a sub-optimal outcome.

To Miss cluelesswithcash - what are your goals? Do you have a house/mortgage? Do you want one?

Are you looking to FIRE by renting and investing the surplus? Do you want to FIRE via Realestate or stocks? Or both?

For shares... please ignore financial planners. In your shoes I would place $8,000 a month into an S&P 500 Exchange Traded Fund (ETF) and reinvest the distributions. Keep it simple.

I don't agree that it's "bad advice" or in any way a disservice to this forum. I do agree that it may be easier to make those initial steps emotionally to gradually get into the market rather than all at once, but that doesn't make investing all at once bad advice. Market timing is a bad idea, period.

Also, keep in mind that the OP is not the one who had hesitations about stock market valuation, so may be helpful to hear what the OP has to say before suggesting a gradual approach, as this suggestion may be harmful if OP would have in fact been emotionally ready for this (if it hadn't already been shot down). So again, while I do not disagree that some may find this gradual approach better for some, I think it's still encouraging market timing which is risky in it's own right. The goal here is to let them know what they *should* be doing. If they're uncomfortable with that, then they can respond to let the forum know that, and they can be educated as to why it is still the right answer - although an uncomfortable one for them.

[Tyson]

Here is the history of the stock market from it's inception.  Hope this helps.  You can see that even the great crash of 29 and the great recession of 2008 were just blips in longer term:

[CanuckExpat]

Welcome, congratulations on putting yourself in a good position. It only gets better from here, and investing better will make a big difference in the long run. It isn't too hard with a bit of the right information. I suggest starting by reading these links:
https://www.bogleheads.org/wiki/Getting_started
https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investing_start-up_kit

[CheapScholar]

I'd hardly say I'm "uneducated" about investing or that I'm "new" to investing when I have nearly 150K invested right now.  And it's not just a mere "feeling" about a correction.  Stocks are overvalued, ask anyone in finance. 

[cluelesswithcash]

Thanks for all the answers so far - appreciate it greatly and you've already given me some good ideas!  To answer a few questions:

Without getting overly personal let's just say my living expenses (housing, food, electricity, etc.) are not part of the equation as in they are taken care of.  Not looking to purchase any huge item in the near future and not anticipating having children.

My job is a "passion" job - I would do it whether I was worth 10 billion dollars or worth nothing.  I may not necessarily work at the same exact place in a typical 9-5, but I'd be doing something in the same realm - let's put it that way.  My goal is that I invest the cash I have so that I could be financially independent in the near future should sh*t hit the fan.   My father always told me to "want" a job and not to "need" a job - so that is the principle I want to live by.  I want to have enough money in my nest egg where I don't "need" the job but I have it because I "want" it. 

All I know is I am sitting on quite a bit of cash that isn't really "earning" anything.  I am smart enough to know that.  I want it to work for me and make me a lot of money, instead of sitting there making 1.05%   I am not opposed to stock market and high risk if it meant high return, but obviously with the state of the US economy and current politics - who knows what is going to happen so I have some reservations but am not scared of taking some risk either.  I just don't really know what I'm doing so that is where I am looking for advice with some of my options.  If I did go the stock/high risk route I'd want either a company managing it for me at a reasonable fee, or eventually learning more about it myself (I also wouldn't put all my cash into this type of investment obviously).  I don't mind starting small right now and just getting the cash somewhere (like in a Vanguard Mutual Fund I guess?) where it's earning something and then tinkering with it over the years to make even more by investing it differently (if that makes sense).

As far as what Voya is to someone who didn't know - it is a financial/retirement/investment company.  My 403B/retirement fund with my employer is set up through them.  It used to be called ING.  They have limited funds I can choose from to invest in which is why I haven't been maxing out my 403B contributions because I think they all suck.  It's also why I am paying a fee to have Morningstar manage the retirement fund for me - when I was doing it myself I wasn't getting a return at all, I was actually in the negative a few %, I was happy to see a 1.5% return as sad as that sounds.  Since it sounds like what I can invest in through this retirement plan sucks should I not even put money into this 403B?  Should I just put that money that I have going into the 403B into the brokerage account at Vanguard instead (if I were to put a lot of my savings cash into one)?  Or should I still max out this 403B regardless?

If I have a traditional IRA open with money in it, can I open a Roth IRA and contribute to that instead?  Or do I need to close the Traditional and roll it over into a Roth?  I have no idea as the whole IRA thing has always confused me I just knew I should be putting money into one.  I was doing the traditional to get a better tax return now but I understand the benefit of the Roth because I wouldn't be taxed later when I take money out during retirement. 
 
 

[tawyer]

Short answer:   Open a brokerage account at Vanguard.  Put 80% in VTSAX and 20% in VBTLX.   Then relax and enjoy the rest of your day.

This is advice I wish someone had given me a few years earlier. If you are really excited about the topic of investing, go learn about it and then make changes to this plan.

My father always told me to "want" a job and not to "need" a job

Great advice!

I don't mind starting small right now and just getting the cash somewhere (like in a Vanguard Mutual Fund I guess?) where it's earning something and then tinkering with it over the years to make even more by investing it differently (if that makes sense).

Getting started is the most important step, even with an imperfect understanding.

Since it sounds like what I can invest in through this retirement plan sucks should I not even put money into this 403B?  Should I just put that money that I have going into the 403B into the brokerage account at Vanguard instead (if I were to put a lot of my savings cash into one)?  Or should I still max out this 403B regardless?

It could be that the fees are very high or they are investing it conservatively for you. Without details of what options they have it is nigh on impossible to tell you.

If I have a traditional IRA open with money in it, can I open a Roth IRA and contribute to that instead?

Yes. You can own both accounts but the limit applies to the sum of your annual contributions to both, i.e., $5500 to trad and roth combined.
http://www.investopedia.com/ask/answers/03/081503.asp

[Gunga Galunga]

Since it sounds like what I can invest in through this retirement plan sucks should I not even put money into this 403B?  Should I just put that money that I have going into the 403B into the brokerage account at Vanguard instead (if I were to put a lot of my savings cash into one)?  Or should I still max out this 403B regardless?

It could be that the fees are very high or they are investing it conservatively for you. Without details of what options they have it is nigh on impossible to tell you.

Agree with all of tawyer's responses, but also wanted to add to this particular one. I have to be skeptical that Morningstar's management of your 403b led to your 1.5% earnings, as opposed to just being attributed to how the markets played out. Although 403b's are typically not as good (in terms of fees/selection) as compared to a 401k, it is still a powerful investing tool. If you can share which investment options are available through your plan (and the expense ratios, if you have these), people here will likely be able to point you in the direction of which option(s) are best within the plan. In my opinion, the available options would have to be really bad to consider putting money into brokerage rather than 403b, as the tax benefits of the 403b should more than outweigh the costs of overpriced 403b options.

[cluelesswithcash]

Since it sounds like what I can invest in through this retirement plan sucks should I not even put money into this 403B?  Should I just put that money that I have going into the 403B into the brokerage account at Vanguard instead (if I were to put a lot of my savings cash into one)?  Or should I still max out this 403B regardless?

It could be that the fees are very high or they are investing it conservatively for you. Without details of what options they have it is nigh on impossible to tell you.

Agree with all of tawyer's responses, but also wanted to add to this particular one. I have to be skeptical that Morningstar's management of your 403b led to your 1.5% earnings, as opposed to just being attributed to how the markets played out. Although 403b's are typically not as good (in terms of fees/selection) as compared to a 401k, it is still a powerful investing tool. If you can share which investment options are available through your plan (and the expense ratios, if you have these), people here will likely be able to point you in the direction of which option(s) are best within the plan. In my opinion, the available options would have to be really bad to consider putting money into brokerage rather than 403b, as the tax benefits of the 403b should more than outweigh the costs of overpriced 403b options.

This is what I could find regarding the investment options and how my allocations currently are.  I also have my preference set to be aggressive w/ MorningStar managing this 403B account for me.

Fund Name   Current Elections

STABILITY OF PRINCIPAL   
4020 Voya Fixed Plus Account III   1%

BONDS   
0004 Voya Intermediate Bond Port I   5%
1554 Voya U.S. Bond Index Portfolio I   0%
6257 Columbia High Yield Bond Fund A   0%
8052 PIMCO Real Return Fund Adm   0%

ASSET ALLOCATION   
1670 Amer Cent One Choice 2025 Port A   0%
1671 Amer Cent One Choice 2035 Port A   0%
1672 Amer Cent One Choice 2045 Port A   0%
1673 Amer Cent One Choice In Ret Prt A   0%
1707 Amer Cent One Choice 2020 Port A   0%
1708 Amer Cent One Choice 2030 Port A   0%
1709 Amer Cent One Choice 2040 Port A   0%
1710 Amer Cent One Choice 2050 Port A   0%
2889 Amer Cent One Choice 2055 Port A   0%
4735 Amer Cent One Choice 2060 Port A   0%

BALANCED   
0823 American Funds Am Balancd R4   2%

LARGE CAP VALUE   
0617 VY TRowePrice Eqty Income Pt Srv   26%
0829 Voya U.S. Stock Index Port Inst   5%

LARGE CAP GROWTH   
1379 TRowePrc Blue Chip Growth Fund Adv   5%

SMALL/MID/SPECIALITY   
0081 Voya MidCap Opportunities Port I   5%
0244 Voya SmallCap Opportunities Fund I   0%
0429 VY JPMorgan Mid Cap Val Port I   0%
0752 VY JPMorgan Sm Cp Core Eq Prt Srv   15%
1019 VY Clarion Real Estate Port Srv   4%
1247 Goldman Sachs Sm Cp Value Fnd A   0%
1560 Voya Russell Mid Cap Index Port I    0%

GLOBAL/INTERNATIONAL   
0190 Oppenheimer Developing Markets Fnd A    6%
0573 American Funds EuroPacific R4                   25%
0818 American Funds Nw Prspctv R4                   1%
1551 Voya International Index Port I                   0%

                                                                 Total   100%

[cluelesswithcash]

Okay so I feel like a complete idiot but I double checked my 403B/retirement account and the 1.53% YTD return I was looking at was from Jan 2017 to now lol.  I checked for the past year (Jan 2016 to Jan 2017) and it was 17.7% which I'm assuming is probably really good.  Right?

Also not sure if this matters in regards to my 403B but basically I can choose to put money into it either in a Roth or pre-tax.  I says I can make $18,000 max contribution to this 403B a year.

[Dicey]

Hi CWC,
I'm writing not because I think I have better answers than the other responders, but because you sound like my younger self. Our stories have a number of similarities. I made it to FIRE and so will you. I wish this (and MMM) had been available when I was your age*:

http://jlcollinsnh.com/stock-series/

Shocker Alert: I got to FIRE through the use of a Financial Planner! Yes, I pay fees (gah!), but I know my money is earning more than if my investments were self-managed, so it's worth it to me. No hate please. Or should I say no hate unless you're FIRE and have a NW above 2.5 mil and were never a high wage earner and live in a HCOLA, okay?

*Oh, Dog it makes me feel old to say that!

[cluelesswithcash]

Hi CWC,
I'm writing not because I think I have better answers than the other responders, but because you sound like my younger self. Our stories have a number of similarities. I made it to FIRE and so will you. I wish this (and MMM) had been available when I was your age*:

http://jlcollinsnh.com/stock-series/

Shocker Alert: I got to FIRE through the use of a Financial Planner! Yes, I pay fees (gah!), but I know my money is earning more than if my investments were self-managed, so it's worth it to me. No hate please. Or should I say no hate unless you're FIRE and have a NW above 2.5 mil and were never a high wage earner and live in a HCOLA, okay?

*Oh, Dog it makes me feel old to say that!

Thank you for writing and for the site, I will check it out and read through the info!