Question: \u201cTogether, my husband and I make $350,000 a year. He\u2019s 58 and I\u2019m 50. We have zero debt. We have his military pension and healthcare for life. We have college savings for our son. We also each have a thrift savings account valued at a total of $1 million. Our home is valued at $750,000. I try to put $5,000 a month in a savings account and every time it reaches $100,000, I add it to my mutual funds. I\u2019m wondering if we should invest this $100,000 in real estate, gold, municipal bonds or just keep a high-yield savings and keep saving until we know what we want to do. Who should we be asking for guidance?\u201d<\/p>\n
Answer: You\u2019re in a strong financial position, which makes the decision less about saving and more about timing and clarity, says Tom Buckingham, chief growth officer at Nassau Financial Group. And yes, a pro might be a good idea for you all at this stage: You can use this free tool to get matched with fiduciary advisers<\/a> from our ad partner SmartAsset, as well as sites like CFP Board and NAPFA. <\/p>\n Have an issue with your financial planner or looking for a new one? Email questions or concerns to picks@marketwatch.com<\/a>.<\/p>\n \u201cA licensed professional can help you step back and decide what role that $100,000 is meant to play, whether that is liquidity for near-term needs, long-term growth, future income or protection against outliving assets. Before choosing between real estate, gold or bonds, it helps to be clear about when you expect to use the money and how predictable you want it to be,\u201d says Buckingham.<\/p>\n Indeed, it is important to look at the goals for the money to help you determine where to put it. For example, for something relatively short-term, like a vacation, you might want to leave that in the high-yield savings account; for a long-term goal, you may be able to take more risk in the hopes of higher payout.\u00a0<\/p>\n The answer is probably not one-size-fits-all: Adam Spiegelman at Spiegelman Wealth Management advises against putting all $100,000 in any single bucket. \u201cThe smartest move is keeping roughly $30,000 to $40,000 in a high-yield savings account or money market as an emergency reserve and investing the rest in a diversified portfolio of approximately 60% equities and 40% bonds and fixed income tilted toward moderate growth. The goal is to beat inflation while managing risk,\u201d says Spiegelman.<\/p>\n You ask about real estate, gold and municipal bonds which could potentially be part of the solution, but that is when you want to consider how those investments fit into the rest of your portfolio, says senior vice president portfolio manager Eric Bernal at Johnson Financial Group. <\/p>\n \u201cBeing careful of concentrated positions is key to risk management. Real estate and gold could be pieces in the overall puzzle as they each do something different for the portfolio like driving income from within or providing an inflation hedge. Municipal bonds could be an efficient way to drive yield or income in your portfolio but it may not make sense if you aren\u2019t in a high enough tax bracket. Calculating the taxable equivalent yield will help you make your decision if taxable bonds are more advantageous for you than municipal bonds,\u201d says Bernal.<\/p>\n When making the decision on where to put your money, assess your risk profile. \u201cDepending on how risky of an investment strategy you\u2019re willing to implement, the rewards will differ. I\u2019m not suggesting blindly investing in something that offers high rewards, I\u2019m suggesting the opposite,\u201d says Alina Trigub, managing partner at SAMO Financial. \u201cLearn what opportunities are out there and read up on other Main Street investment types. These are typically the ones that are not dependent on stock market fluctuations such as real estate, gold, oil and businesses. Then make an informed decision once you learn more about the opportunity and the associated risks.\u201d <\/p>\n The questions you\u2019re asking are all the right ones, but there are a few more that need to be answered to provide you with specific advice. \u201cHow much has your after-tax savings mutual fund account grown to? We traditionally want to keep three to six months\u2019 worth of expenses and dollars that we may need in the next 12 months sitting in cash or cash equivalents,\u201d says Bernal. \u201cThese vehicles don\u2019t earn a lot but they are safe. Once we step out of that time frame, we can start to explore other vehicles that may take on some risk but potentially provide more return. This is where the questions would start on what the expectation would be for those additional dollars.\u201d<\/p>\n For his part, Schmuel Shayowitz, president and chief lending officer at Approved Funding, says the advice he gives investors interested in anything safe or something they may want to access in the near future is to consider real estate-backed strategies. \u201cWhether it\u2019s through owning actual property or joining real estate syndications, there are all kinds of opportunities that offer security with upside. Real estate is one of the best security and strategic investment options when economic uncertainty rises, especially in an environment where news is filled with geopolitical insecurity, economic instability or inflation fears,\u201d says Shayowitz.\u00a0<\/p>\n Don\u2019t wait <\/p>\n \u201cIf your ultimate intent is to invest the savings into the stock market, a commodity or fixed income security, waiting until the funds hit $100,000 means missing out on potential growth. Establishing a periodic investment plan into mutual funds or ETFs to invest the savings every month will give the opportunity for growth immediately, rather than waiting until reaching the $100,000 milestone,\u201d says certified financial planner Tom Betros at D\u2019Arcangelo Financial Advisors.<\/p>\n Waiting to invest until a single point in time makes it a lot tougher to make decisions due to behavioral biases, says Betros. \u201cA periodic investing plan, also called dollar-cost averaging, can remove the emotions from investing and allow you to get immediate market exposure which gives you the potential for gains once you have the funds to invest,\u201d says Betros. <\/p>\n Something else you should consider<\/p>\n But first, you may want to back up a bit. While you appear financially solid on the surface, the full picture is more complex than it seems, says Spiegelman. \u201cBefore addressing the $100,000 question, there\u2019s a more pressing issue: almost your entire retirement income, TSP withdrawals, military pension and Social Security will be taxed as ordinary income. That\u2019s a significant structural problem that needs to be addressed now while you still have time and high-earning years ahead,\u201d says Spiegelman.<\/p>\n Every dollar you pull from the TSP is ordinary income. \u201cAdd a taxable pension and likely taxable Social Security and you\u2019re looking at a retirement where nearly all income is taxed at ordinary rates, potentially 15-20% or more depending on withdrawals and state of residence. You need to model when income stops, when withdrawals begin and what the year-by-year tax picture looks like. You also need to make sure the TSP itself is positioned for growth,\u201d says Spiegelman.<\/p>\n What kind of financial adviser can help?<\/p>\n You should explore your options and look for someone with extensive experience in financial planning. \u201cYou want to partner with someone that has key characteristics in portfolio management, tax planning, estate planning and financial planning. Having a financial plan is critical to your success as it will provide you with a roadmap and help answer questions around retirement savings and spending, college savings or where you should take money from when you need it,\u201d says Bernal.<\/p>\n Working with someone like a CFP is recommended for a few reasons. To earn their designation, CFPs complete extensive coursework, pass exams, perform thousands of hours of work-related experience and adhere to a fiduciary duty, which eliminates the potential for conflicts of interest to arise. You can use this free tool to get matched with fiduciary advisers<\/a> from our ad partner SmartAsset, as well as sites like CFP Board and NAPFA. <\/p>\n