48 years old, currently have no investments. My net worth is my car and the clothes on my back, and I don’t ever want to be in this situation again.

(Edit: I don’t need to buy a house or anything whatsoever related to a house, so please don’t mention the “h” word in your response, it’s triggering me for tangential reasons. Let me be clear, I will NEVER care about real estate whatsoever, mmmkay? Just trust me when I say I have a roof over my head and it’s completely paid off, no property taxes, and No, I will never sell it, so the whole h-word" aspect of life is not a concern for me, k?)

Just looking for guidance where to invest this relatively small amount of money every month so in a few years when I’m older & frailer I’ll have enough for retirement. I don’t want it to just sit in my bank account, I want it to grow.

For reference, I’ve been living on approx $1500 per month for as long as I’ve noticed, so I don’t need much per month, and the sooner I die, the less retirement fund I’ll need, but we can never predict when anyone’s death will happen, so let’s assume I’ll live to 100 because I’m ridiculously healthy & an exceptionally good driver, never been in an accident, one speeding ticket in my entire life, no social life so I never get into risky situations, so let’s just plan for the possibility I’m going to live another 50 years.

  • SatanicNotMessianicEnglish
    9·
    1 year ago

    I’m going to take a slightly different approach, although I generally agree with all of the advice here.

    1. Establish an emergency fund. If you’ve been living paycheck to paycheck and do not have a significant amount of money in accessible savings, you’re taking a risk of not being able to handle something like a car repair or unemployment. Withdrawing funds from tax-advantaged retirement accounts can take time and incur significant financial penalties. The rule of thumb is to figure out what you spend in a month, and plan on an emergency fund that can carry you through 6 months of zero income. Some people do less, some do more, and if you’re really thinking about it you can figure out what expenses you can cut in order to make those savings go further.
    2. Putting money into a matched 401k is a no-brainer, and going with an index fund or retirement date fund is the easiest way to go. However, realistically examine the expected savings by the time you plan to retire. This tells you how much you’ll be able to draw down and for how long. I’m going off of memory here, but I think the consensus safe draw down rate is 4% per year. That means $1M in retirement savings will give you about $40k per year to live on (not including things like social security). Depending on where and how you live, this might be sufficient. You’d have to plan for it though, which is my point.
    3. There are plenty of retirement calculators online to help with this. You enter your age, when you want to retire, the amount you’re saving, and it will tell you what your savings will be when you’re 65 (or whatever) and how long it will last at different draw down rates. Some will let you estimate things like rate of return too. Be realistic.
    4. Realize that the closer you get to retirement, the more conservative your investments should be. To paint with a very broad brush, low risk=low reward, high risk=high reward. The further you are from retirement, the longer you have to recover from a downturn. Look at the retirement date targeted funds - they move over time from a more speculative set of investments to a more reliable one. What I’m saying here is that you’ll read things about being able to plan around a 10% rate of return. That’s the average for a stock based portfolio, and it can swing around quite a bit. Individual stocks have a higher risk than an s&p index fund, and the index fund will have a higher risk than a conservative, income-oriented fund. Remember that when you’re using those retirement planning web sites.