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What's the best thing to do with excess wealth at age 30?

I have excess funds and am unsure what to do with them I'm 30 years old with a stable job and single. I've already contributed to reach my company match on my 401(k) and maxed out my Roth IRA contributions. I have already set aside 1 year of emergency funds. Now I still have excess savings, and I'm unsure of what to do with the money. First world problem (I know), but what do you recommend to help grow my wealth?

Retirement Savings, Investing
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March 2018

First, I want to congratulate you on contributing as much as possible to your retirement plans at a relatively young age. This is something we always recommend, but many lack the discipline to do. One year of emergency funds is a great cushion! We typically recommend at least 6 months, but this should be based on a number of factors including the cost of living in your area, your expenses and comfort level.

As you mention, excess savings is a great problem to have. Now that you have hit all the basics, you need to figure out your objectives for this excess money. Will you need to access this cash to buy a house with in a few years, or are you looking for longer-term growth and may not need this money for 20 to 30 years? Basically, the most important piece to determine how to invest is your timeframe. If you have a long-term time horizon, you may want to take on more risk with the potential for stronger average returns, but if you have a shorter horizon, you should consider having less risk, which generally means giving up some of those potentially better returns.

Figuring out your time frame is easiest by sitting down with a fee-based wealth advisor, but there is, of course, a fee associated with having access to more personalized advice. If you want to figure out an asset allocation on your own, the general rule of thumb is that longer-term means you can take more risk, which means more equities and less bonds in your portfolio. If your time frame is shorter, then you would want more bonds and less equities. You should also consider the fees associated with any investments you want to make. To have a better understanding of the investment fees you are paying, read: Mutual Fund Fees: How To Know What You’re Paying For.

After you determine your allocation, open an individual or joint account at a custodian of your choice. Schwab, Fidelity, TD Ameritrade all have strong reputations, and you can invest in many options there. If you are doing this yourself, it is likely easiest to buy a few index funds that will give you the desired level of equity and bond exposure. If you would rather not navigate this yourself, a financial advisor can coordinate all of this for you!

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