While saving $10,000 is a wonderful accomplishment, especially considering today's economic climate, it's crucial that you put your hard-earned cash to good use. If you're unsure of how to proceed going forward, here are four tips to safely and wisely allocate your cash.

Boost 401(k) Savings
Boosting your 401(k) savings is a great idea, especially if your employer matches contributions. Say your employer matches your contributions up to 5% of your pay, but you're currently only contributing 3%. In that case, you're essentially forfeiting 2% of your monthly salary. Consider increasing your contributions at least up to the company match. The contribution limit for this year on 401k plans is $17,000.

Open an Individual Retirement Account
There are two options for IRAs: traditional and Roth. The main difference is the tax treatment of contributions and withdrawals. With a traditional IRA, you can write off contributions on your taxes each year, but your withdrawals are taxed during retirement. With a Roth IRA you contribute after-tax dollars, but pay no taxes on withdrawals. Consult the IRS website for a full list of restrictions, penalties and other terms.

Start a College Fund for Your Children
You may also want to take your nest egg and invest it in your child's college fund. Your best bet is a 529 plan. The cost of college is staggering, and anything you can do to help pay for these expenses can help your children lessen their reliance on student loans. Depending on where you live, you may be able to deduct your contributions on your state income tax return.

Increase Your Mortgage Payments
Say you're 10 years into a $200,000, 30-year fixed mortgage at 6%. Bumping up your payment by just $100 could save nearly $19,000 over the life of the loan, and you'll pay off your mortgage almost three years earlier.

The Bottom Line
Now that you've worked so hard for your money, it's time to get your money working for you. Just be sure that you research all fees and expenses that may come with any investment you choose. Some fees can really take a chunk out of your investment over the long-term, and you don't want your investment efforts to have an adverse effect on your savings.

Related Articles
  1. Professionals

    Are ETFs a Good Fit for 401(k) Plans?

    The popularity of ETFs among investors and advisors continues to grow. But are they a good fit for 401(k) plans?
  2. Professionals

    How to Create a Client Investment Policy Statement

    Investment policy statements are vital for financial advisors and their clients. Here are some tips for creating them.
  3. Retirement

    Using Your 401(k) to Pay Off a Mortgage: The Pros and Cons

    Learn the advantages and drawbacks of using assets accumulated within a 401(k) retirement savings plan to pay down a mortgage balance.
  4. Investing

    2 Common Ways to Misuse Target Date Funds

    The world of asset classes is just as complicated as taking vitamins. How much should you take of small caps? Intermediate bonds? Emerging market stocks?
  5. Mutual Funds & ETFs

    What Target-Date Funds Can Teach About Investing

    Target-date funds are a popular way to invest for retirement. Here's what they can teach the novice investor.
  6. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  7. Professionals

    How to Protect Retirement and Help Adult Kids

    Parents can both protect their retirement money and help their adult kids. Here's how.
  8. Retirement

    10 Ways to Save Your Retirement: It's Not Too Late

    It's not too late to start saving for your retirement, even if you took longer to start thinking about it and doing something about it.
  9. Investing

    Why Is Financial Literacy and Education so Important?

    Financial literacy is the confluence of financial, credit and debt knowledge that is necessary to make the financial decisions that are integral to our everyday lives.
  10. Investing

    10 Ways to Effectively Save for the Future

    Savings is as crucial as ever, as we deal with life changes and our needs for the future. Here are some essential steps to get started, now.
  1. What is the size of the average retirement nest egg?

    According to a 2015 Government Accountability Office (GAO) study, people between the ages of 55 and 64 with any retirement ... Read Full Answer >>
  2. What are the risks of rolling my 401(k) into an annuity?

    Though the appeal of having guaranteed income after retirement is undeniable, there are actually a number of risks to consider ... Read Full Answer >>
  3. How can I determine if a longevity annuity is right for me?

    A longevity annuity may be right for an individual if, based on his current health and a family history of longevity, he ... Read Full Answer >>
  4. How does a Roth IRA grow over time?

    Your Roth IRA account grows over time thanks to two funding sources: contributions and earnings. While your contributions ... Read Full Answer >>
  5. Can my 401(k) be seized or garnished?

    As long as your retirement funds are held in your 401(k) and you do not take them as distributions, your 401(k) cannot be ... Read Full Answer >>
  6. Can my IRA be taken in a lawsuit?

    Whether your IRA can be taken in a lawsuit depends largely on your state of residence and the judgment in question. There ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!