‘I know I have quite the time horizon, and that I don’t know everything’: Where should I invest my unexpected $5k bonus for long-term growth and max out my Roth IRA this year?

Hi Money Minder,

Hey there, I’m a 24-year-old making $60k in Iowa. So, I’ve got this unexpected bonus of around $5k coming up next month, and I’m scratching my head about where to invest it. I still have $4.5k left of my $7k annual cap for my Roth IRA. Also, I’ve got a HYSA with $15k, HSA with $3k, and a balance of $30k in my Roth IRA.

I’m on the lookout for a long-term investment that I can consistently put money into on a monthly or bi-weekly basis, even after I max out my Roth IRA. Once that’s maxed out, I’ll dump any “extra” cash into my 401k. My company doesn’t match contributions, but they throw in a percentage of my salary as a lump sum at year-end. Plus, I’m already putting $200 a month into my HYSA, which comes with a sweet triple tax advantage. On top of all that, I get $500 extra annually from my employer for having a high deductible health plan.

I know I’ve got lots of time ahead of me, and I’m aware that I may not have all the answers or be doing things the “right way.” I’m open to any and all suggestions. Just looking for a simple ETF to invest in.

My two biggest holdings are VNQ and QLD, totaling around $10k.

I’m just unsure about where or how to invest this surprise cash. I really want to max out my Roth IRA again this year.

Cheers,

Response from THE MONEY MINDER:

Hello There,

Hello, it sounds like you have a good handle on your finances and are thinking ahead about investing your unexpected bonus. Firstly, congratulations on being proactive about your financial future! It’s great that you are considering maxing out your Roth IRA and are already making contributions to various accounts.

Given your long-term investment goals and desire for a simple ETF to invest in, one practical approach could be to consider adding the unexpected $5k bonus to your Roth IRA to help you reach the annual limit. Since you mentioned you have $4.5k left to contribute to your Roth IRA, this would be a great way to maximize your tax-advantaged retirement savings.

As you continue to invest monthly or bi-weekly moving forward, you could consider allocating those additional contributions to a broad-market ETF like VTI (Vanguard Total Stock Market ETF) or SCHB (Schwab U.S. Broad Market ETF). Both of these ETFs provide exposure to the entire U.S. stock market and could be a good option for long-term growth and diversification.

It’s important to also reassess your overall investment strategy periodically to ensure it aligns with your financial goals and risk tolerance. If you have any doubts or questions along the way, seeking advice from a financial advisor could provide valuable guidance tailored to your specific situation.

All the best from THE MONEY MINDER, and feel free to reach out if you have any further questions or need additional assistance!