Stagnant Money - Investment Advice Needed

[millennialmustache]

Hi Everyone,

First time poster here looking for some investment advice.

I have roughly $30,000 sitting in a low interest savings account and was thinking of investing this money into Index Funds and possibly opening a Roth IRA to contribute the maximum amount of $6,000 for this year (can I even do that without an income?).

My previous employer provided a 3% match for a Traditional IRA which I contributed to each year. However, I decided to take some time off this last year to travel and no longer have access to contribute to my Traditional IRA (as I do not currently have a job).

Is this a sound investment? Should I even bother with a Roth IRA given I already have money in a traditional IRA?

*I do not have any debts.

Thank you,
Millennial Mustache

[Travis]

Did you work this calendar year? If so, you can contribute to an IRA. What does your tax situation look like for this year? If your reportable income is going to be on the lower end, go for the Roth.

[Car Jack]

If you didn't work this year, you can't contribute to a Roth (unless you have a spouse who did work) and IRA contributions are NON tax deductible.  You can open a taxable brokerage account, if you want to buy funds.  If you want to remain safe, you can dump all of that into a Redneck Bank Megamoney account and get 2.4%. 

[Chris Pascale]

Hello,

Thank you both for you answers. I did not work this year so it seems that a Roth is out of the question. I'll look more into the accounts recommended by Car Jack.

Millennial Mustache

You could work the rest of the year and put an equal amount into the Roth up to $6000.

[Brianmcg321]

What is this money going to be used for in the future?

[BicycleB]

Index funds are a very sound investment for the long term, but can easily decline in the short term and take years before even returning to their original value. Hence, @Brianmcg321's excellent question above.

One way to do it is keep funds for the next year (or two, or some period you feel is appropriate) in bank savings or bond funds or money market accounts - reliable investments that are likely to change little in the short term and to preserve value during stock downturns. Then put the rest in stock market mutual funds.

Is the $30,000 your only assets?

Any idea when you will return to work?

[BicycleB]

At periods of five years or longer, stocks are usually pretty sturdy, with more upside than most investments. In your shoes, I'd put the 30k there.