What would u do with 100k+ at 21

[forchristianfellowship]

I’ll try keep this short. I’m currently 19 and have 60k saved up from penny pinching since youth and working long days. Currently I’m making ≈$23 hourly working ≈45 hours weekly. I don’t really like the job I’m at but have decided to stick to it at least until I turn 21 by which point I should have met my goal of 110k before 21. What should I do with this money? My plan since when I was young was to get into real estate but it’s clearly not a buyers market. I don’t have a business idea I want to pursue and no degree. (I start classes January for a associate degree. Not because I know what I want from it but because I feel it could be valuable.) Really I’m just curious what you would do in my shoes. My money is currently in mix of Roth, individual investment acc, and hysa. Any ideas for college majors that would be useful for someone with a decent savings? I’m ALWAYS ready to learn whatever could be lucrative. An idea I’ve had is to just set aside 50k and use that to max out Roth IRA until it runs out so I can essentially forget about retirement.(obviously not completely forget but you get the idea). I feel like I’ve met a plateau and don’t know where to advance

 

[aldersgate]

@forchristianfellowship At 62 y/0 this is about 2.4mm with 8% returns in VTI. Set it and forget it my friend. Congrats

 

[stephknce]

@aldersgate That assumes 1) you get 8% returns every year without fail which we know is not true. 2) you’re ignoring cap gains tax so that 2.4m is now 2mm at today’s tax rate who knows that taxes will be in the future?

Max your Roth. Invest the rest - yes even into VTI - and take your gains if any to find your Roth contribution each year. For added protection take some and put it in a HYSA or cd ladder strategy to protect some of it.

 

[aldersgate]

@stephknce The average annual rate of return over the last 50 years of the SP500 is 10%. 8% as a good conservative estimation method. It’s what millions of people and data centers use.

There should be ZERO protection involved until someone’s AT MOST 15yrs from retirement.

 

[stephknce]

@aldersgate I’m aware of the average, however too many take that as a what they can expect to get each year. OPs other issue as I’ve pointed out is all his investment is taxable either now or tax deferred. He needs a ROTH-type strategy as well to avoid future taxes and RMDs as well as a cash bucket to start building for those down years when the market is not doing 8% but is -19 like 2022 or -5 like 2018.

 

[aroeland]

@forchristianfellowship I like the idea of maxing a Roth every year you can.

At 21 in this market, I’d be considering living cheap with a roommate vs buying. But that’s personal.

You’re saving a lot of money yearly. Finding a job with a 401k would give you access to a tax advantaged investment account. Job with a 401k match is even better obviously.

On my calculation, if you max a 401k every year, at 6% return you’ll be a millionaire by 40, and have 5+mil by 65. That’s without increasing the contribution limit yearly.

At 7% you’re at 1mil by 39 and 7mil at 65.

At 9% you’re at 1mil before 37 and 13+mil at 65

You’re so far ahead that it’s laughable. Pour in the money, set it and forget it, and enjoy early retirement.

Given how low your taxes are now and how much you could earn investing, I would max a Roth first, then 401k (if you have one), and then whatever is left into brokerage.

 

[ahumbleheart]

@aroeland Would you add to a roth 401k or traditional given the age?

 

[aroeland]

@ahumbleheart Roth vs Traditonal is a question on current and future tax brackets not age, per se.

Given that OPs contributions will grow for so long, and their tax bracket is relatively low right now, I’d do Roth. In other words OP is likely to have significantly more retirement income compared to current income.

Especially if they’re contributing to a 401k already, the tax bracket could be extremely low.

 

[lalaland777]

@forchristianfellowship Any accounting courses included with the associates program? Computer science/programing? Focus on a field where jobs are plentiful now and in the future.

Keep grinding. Save more money. Build a nest egg and a career.

 

[hongye2011]

@forchristianfellowship Use an investment calculator and play around with different rates of return with 30-40 year time horizons. Then you will realize high equity-low cost index funds will be one of the smarter plays with this much money at your age. Could be worth millions if it doubles every 7-10 years.

 

[aliban]

@forchristianfellowship What I would do would probably be different than most people. I'd start a business, cash flow it myself. Being 21 I could go real lean, live on almost nothing. I probably would figure out how to start the business and cover my expenses for a year off of 20k. I would behave like a broke college student and tune the world out.

The other 80k would go into an index fund. If things are successful, contribute towards it. If things are mediocre, leave it there and don't touch it. If things go catastrophic, pull out the bare minimum I need and change plans, get a new job, and plan on rebuilding that over time. You're young, you have so much time AND you're young enough to take risks.

Index funds like SWPPX or VTSAX double every 7 years due to compound interest (annualized returns, its an average). This is not guaranteed but the odds are good. So even left alone for 28 years it becomes 640k. If you did other things well by that time, 49 years old, you've either grown it further or have other good investments. You'd probably have financial freedom before age 50.

 

[jharf2]

@forchristianfellowship Index funds are a good bet and nothing wrong with that approach.

As to whether or not it is a buyers market is always a subjective statement. Buying for an investment property might not be the best time in some markets, but there are a lot areas about ready to burst their bubble.

If you are in a location you plan to stay in you can start looking for properties that are in need of some work right now. I bought my first house in the US at 20 through a sheriff’s auction in early 1994. Average home in the neighborhood was going for $78k in a town where $120k was the town average. I paid $16,500. I took out a $12,500 home equity loan and put a new roof on professionally along with a new furnace to make it livable and made many of the repairs myself over the next year at the cost of another $8500. I lived in the place for another 4 years and sold it for $119k. I would have kept living in it except for I needed to move and upgrade

 

[anngirl]

@forchristianfellowship Index fund and don’t touch it until you are 65. Knowing you’ll be a multi millionaire when you retire will lighten your step until then.

 

[fender963]

@forchristianfellowship Sounds like you have a great split of accounts already. But the following breakdown may help you grasp it better too.

• emergency fund use 6 months expense as your total. Maybe around 10k. Accounts for job loss, rent or mortgage coverage, car issues.
• if you have goals of getting into real estate or pursing a business idea set some aside in an account with decent growth potential but that you can access near term without large penalty.
• Finally as you mentioned looking after retirement now could let you figure out what you want out of a career as it seems you don’t know what you want to do just yet. However it seems you’re interested in real estate, finance, and building wealth. Maybe that answers your question?

There’s really no secret as to what to do with that money it’s just making sure you’re diversified and the necessary accounts are maintained to make it work for you over time. Pulling it to put into real estate or business venture is up to you!

Congrats! What a position to be in at your age.