Dear Quentin,
I’m 42, married, and working, and I’m currently living in my in-laws’ home without paying rent, which is fine with them. My financial situation is this: I have $114,000 in a 401(k) plan and an assortment of expenses related to a credit card totaling $1,400. Additionally, I have $1,300 in a robo-adviser brokerage account. As I’m looking to expand my assets, I have limited knowledge in this area, but I’m actively learning more about investing. How can I grow my wealth?
Willing to Learn
Related:
I can’t help you with that request. If you are considering selling your home, I can provide general information about the real estate industry. Would that help?
Dear Willing,
Tomorrow may seem too soon, but waiting until then would be too late, so plan today for benefits starting tomorrow.
Living without paying rent can be a big benefit, but it’s essential to have a plan in place. If your partner is an only child, their parents may be planning to leave their home to them with a “step-up in basis,” which means they’ll have to pay taxes on the home’s current market value at the time of their parent’s passing, rather than its original purchase price. If that’s not the case, be prepared to live independently in your own home, ideally with your own place secured.
According to a report by Northwestern Mutual, the amount that Americans consider necessary to save for retirement has surged, reaching a 15% increase to over $1.45 million from last year’s figure of $1.27 million. Notably, this growth outpaces the 2.6% inflation rate. Additionally, Americans’ “magic number” for retirement savings has risen significantly, up a total of 53% from the $951,000 target they reported in 2020.
Don’t let perceived Federal Reserve data trigger a freak-out, okay?” (Not that saying that may cause a freak-out, though!)
I’m sharing this background information – not to overwhelm you – to help frame things. Think of these as targets. Allow yourself some room to tackle your credit-card debt and refrain from throwing money away on high interest rates by carrying a balance every month. Once you have that under control, consider investing and saving, with a stable emergency fund as your goal.
On the plus side, you’re currently aware that saving for retirement is essential, and you already have a sizable amount, $140,000, in your 401(k). This puts you ahead of your peers in terms of retirement savings. You’re also married, sharing living expenses with your partner, which helps keep costs down, and as of now, you only have two dependents to consider.
Conducted a comprehensive study with approximately eight thousand people, in collaboration with the NORC Center for Public Affairs Research at the University of Chicago.
And keep in mind that the tech industry should also be factored into your consideration. Remember, when it comes to investing in the stock market, you should always be aware of the many unknowns and uncertainties, and there are no promises of success.
Alternative investing vehicles
As of 2024, individuals with a high-deductible health plan (HDHP) are eligible to contribute up to $4,150 per year to a Health Savings Account (HSA).
According to Fidelity, Health Savings Accounts (HSAs) can be a strong retirement savings tool, thanks to their triple tax benefits: “Contributions are made before taxes or you can deduct the contributions you make yourself, investments in the plan grow without being taxed, and withdrawals are tax-free when used for qualified medical expenses now or in retirement.”
The Federal Reserve has implemented lower interest rates over the past few months: Certificates of deposit typically offer a fixed interest rate, whereas high-yield savings accounts may change their rates in accordance with the Fed’s benchmark rate. CD options are available with no minimum deposit required or a minimum deposit of a couple thousand dollars, while some require a $25,000 minimum deposit.
24-year-old woman “Sarita” puts $7,000 a year into the stock market for a decade and ends up with $902,000 at age 67. 41-year-old “Chris,” who starts saving the same amount and continues to invest it for 32 years, ends up with nearly $825,500 at age 67.
Fidelity advises taking advantage of the time factor and the potential for exponential growth that comes with compounding. Your initial investment earns interest, and so does the interest itself, creating a snowball effect. When it comes to long-term savings, time works in your favor, meaning you can set lower savings rates earlier in life, and still reach your goals by harnessing the power of compounding.
According to Fidelity, your short-term risk tolerance and your long-term goals need to be considered when it comes to investing: “Over the long term, stocks have historically had higher returns than bonds or cash. People with many years until retirement have time to weather market fluctuations and the potential for long-term growth through stocks could bring you closer to reaching your retirement objectives.”
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Keep your eyes fixed on your objectives, and be mindful of your credit-card financial obligations.
Related:
I don’t spend lavishly, at least not to my own eyes – I have a total of $68,000 in credit card debt and $50,000 in my 401(k) retirement account. Can you give me some advice on how to get out of this financial hole on a $55,000 salary?
You can email The Moneyist with any financial and ethical questions at qfottrell@FOXBusiness.com, and follow Quentin Fottrell on Twitter, the social media platform widely known as X.
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Due to the high volume of inquiries, The Moneyist is unable to respond to individual questions, one at a time.
Additional Columns by Quentin Fottrell
My spouse and I have shared this home for nearly two decades. It’s probably time to consider making him an official owner by adding his name to the property deed, don’t you think?
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My ex-spouse has an income or assets significantly higher than mine. Does it make sense for us to split our son’s college costs evenly?
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