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What are the best investment options when having extra money and no debt?

I'm 28 years old with a salary of $120,000 in the San Francisco Bay area. I have no debt and I max out my 401(k) as well as Roth IRA. Over the years, I have saved over $100,000 in a savings account currently accruing only 1.75 percent interest. What are some good investment options to grow my money? I'm single and don't see myself getting married in the near future. I would very much like to invest in real estate, primary residence or rentals, but with the Bay area housing market, it might not be an option for me. Therefore, I am looking for other investments.

Banking, Career / Compensation, Debt, Estate Planning, 401(k)
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August 2018

Thank you for your inquiry and your excellent question. The first thing that I noticed in your question is your ROTH IRA contribution and income. Just be aware of the adjusted gross income (AGI) limitations for ROTH IRA contributions since you are approaching the bottom of the phase. You state your income, but I do not know what your AGI is. Look at the IRS website and be aware of where you might be phased out. If you get phased out, you can always consider an IRA.

Now on to your question: Based on not being married and not having a primary residence you want to consider what your time horizon is for those items and prioritize them against investing the assets for the longer term. If you are planning to get married and/or purchase a primary residence in the next few years, you may want to consider lower risk investments to ensure your down payment or honeymoon assets are protected. In CA you could do a muni-bond ladder or CD ladder to yield a bit better than cash.

If your income vs cost of living variance is large enough that you know can replenish the current savings, within the time frame in which you are planning to purchase a primary residence and/or get married, then I would suggest you build a diversified portfolio geared towards a long-term time horizon, but designed around your risk tolerance. Within your diversified portfolio you could potentially carve out a small allocation for some sort of real estate investment, such as a publicly traded REIT, so that you can get the best of both worlds; investing along with some diversified real estate exposure. You may want to search out a CFP® professional in your area that is product agnostic and will act as a fiduciary when working with you. Make sure you do your homework and research anyone you plan to work with. I would especially recommend working with a professional if you chose to invest in concentrated positions, such as a REIT so that someone can explain all the potential risks of investing.

Know that the information I provided above are some examples of items I would suggest for a client. But since all I know about you are the seven sentences you provided, this is not nearly enough information to provide you with a recommendation or advice. The above information should be confirmed with a professional that has had a chance to explore your personal situations to ensure it is aligned with your goals, objectives and risk tolerance.

Please do not hesitate to contact me with any questions.

Best regards,

Robert J Leiphart, CPF®

July 2018
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August 2018