How would you invest $23,000 if you were a single 50 year old man with around $30,000 in accrued debt and still working but absolutely nothing in retirement. The goal for this invested money is to try to build it as fast as possible to both pay off debt and have a little something for either retirement.
Investing $23,000 as a 50 y/o with no wealth built
byu/Critical-Structure29 inpersonalfinance
Posted by Critical-Structure29
21 Comments
Sounds like you are asking about a framework for what to do with money.
Start with reviewing the Prime Directive in the PF Wiki. It will answer your question and many other questions you didn’t realize you should be asking.
* https://www.reddit.com//r/personalfinance/wiki/commontopics
Buy a year out LEAP call option on something currently undervalued in the stock market like MSFT or NVDA, and literally don’t look at it until maybe September just to check in.
What’s the interest rate on your debt?
You almost certainly will be better off paying down your debt than investing.
If the interest rate on your debt is 7%+ then you’re not likely to build your savings up to anything, just slowly keep draining it to interest.
If your interest rate on your debt is over 7% use the money to pay it off. Personally I’d probably do the same if the interest is over 5%.
Try to pay off debt (and limit any more). At the same time begin your 401k to get your employer match (free money). Leave yourself 1-5k for emergencies and open a Roth IRA to max out each year if possible (tax free growth if you wait until retirement age, 59 1/2 or older).
From there increase cash savings to a number you’re comfortable with (let’s say 10k?) and try to increase your 401k contributions to 10-15% of your check (if possible) or whatever extra you can.
At 50 with $30k in debt and $23k to work with, I’d pay off the high-interest debt first (anything above ~7%) before investing a dollar — the guaranteed “return” of eliminating a 20% APR card beats almost any market bet. Whatever’s left goes into a Roth IRA maxed out ($7,000/year at your age), then a taxable brokerage in a simple target-date or total market index fund. The catch-up contribution rules after 50 are actually pretty generous, so you have more runway than you think.
You will not retire as things are now. You need some serious straight talk about your finances and where you are with your lifestyle. Start watching videos and educating yourself
If the interest rate on your debt is 10% or higher, pay that off in full.
Start here: https://www.reddit.com/r/personalfinance/wiki/commontopics.
r/Bogleheads may be worth a look.
You’d be better off paying down your debt before investing
Tuck it all in 401k and keep paying off debt.
If it were me, I’d pay off highest interest debt first.
If had an employer matched 401k, would start to invest something each month, if possible the amount to get maximum employer match.
Would, for peace of mind, invest $3k in a ETF such as SDHC and have the dividends reinvested. If possible, automatically invest, say, $100 monthly. Consider brokerage or a Robinhood account.
I would take to a financial advisor equitable and fidelity are good services and they can help you manage your money into assets that can be a safety nest for investing towards retirement in the interim work to pay off that debt and contribute to the investment
Pay down your debt then focus on retirement
Depending on the interest on your debt almost always better to pay down liabilities, not incur more, and move on.
The more your interest on your debt almost always the better it is to pay it off.
I’d eliminate high interest debt and invest in the S&P500
Pay off half or a little more of the $30,000 – whatever is the highest interest rate first. Leave the rest in the bank for an emergency and try to pay off the rest of the debt over the next year. Then when it hits 0, start using that same money to put into a roth IRA every month.
You should probably just pay off the debt asap with the $30,000. If the $23,000 is an emergency fund then you could put it in to T-Bills via Treasure Direct and manage it yourself or get a CD with a high introductory rate for new customers. Look on line for those and be sure that you can make a penalty free withdrawal or at least the penalty isn’t too hefty if you have to withdraw early.