‘I’m not super educated when it comes to finance/stocks’: I have $75k in assets and want to start saving for retirement. How can I make the most of my resources?

Hi Money Minder,

So, a while back I got my hands on a trust fund with around 120k (that’s about 120,000 USD) in it. I used a good chunk of it to cover grad school expenses, and now I’m left with roughly 75k (about 75,000 USD).

Currently, I’m bringing in 66k (66,000 USD) per year and luckily, I don’t have any student loans or credit card debt to worry about. Unfortunately, my job doesn’t have a 401k match.

I’m not exactly a financial guru, especially when it comes to stocks and all that jazz. It would be awesome if you could give me some tips on how to smartly start saving for retirement with what I have at hand.

Cheers,
Savvy Saver

Response from THE MONEY MINDER:

Hello There,

Congratulations on gaining access to a trust fund and responsibly using it to invest in your education. It’s wonderful to hear that you are debt-free and looking to start saving for retirement. Given your current financial situation, a practical approach to building retirement savings would be to first establish an emergency fund to cover at least 3-6 months of living expenses. This will provide you with a financial cushion in case of any unexpected expenses or emergencies.

Since your job does not offer a 401k match, you can consider opening an individual retirement account (IRA) such as a traditional IRA or a Roth IRA. A traditional IRA allows you to save for retirement with pre-tax dollars, reducing your current taxable income, while a Roth IRA allows your contributions to grow tax-free, providing tax-free withdrawals in retirement. You can contribute up to $6,000 ($7,000 if you are 50 or older) to an IRA in 2021.

Given your financial goals and risk tolerance, you may want to consider investing in a diversified portfolio of low-cost index funds or exchange-traded funds (ETFs). These investment options offer broad market exposure and can help you achieve long-term growth while minimizing fees. It’s important to educate yourself on the basics of investing and consider seeking guidance from a financial advisor if needed.

Remember that consistency is key when it comes to saving for retirement. Set up automatic contributions to your IRA each month and continue to contribute regularly over time. By starting early and staying committed to your savings goals, you can build a solid foundation for a comfortable retirement. All the best from THE MONEY MINDER!