How Can We Make Our Money Work Harder for Us?


Q: My husband and I are in our late 20s and don’t have large salaries. But we live frugally and contribute 5 percent to our 403(b)s in order to get the full employer match. We’ve also been adding $1,200 per month to our emergency fund. Now that we’ve built that up, we’re looking for other ways to make our money work harder for us. Should we up our retirement savings or open a regular brokerage account? Does it make sense to invest heavily in retirement accounts that we can’t touch for decades?

Great job laying a solid financial foundation! Having a full emergency fund and contributing enough to get your full employer match is something to be proud of. Since you don’t have large salaries, but you’re able to save a good amount each month, I’d consider two strategies to put your money to work:

First, both of you should max out Roth IRAs ($5,500 for 2017). Your contributions aren’t tax deductible now, but your money grows tax-free. You can also withdraw your contributions (but not any gains) at any time without penalty. This way, you can still plan to invest for the long term, but enjoy more flexibility.

Then you can direct the rest of your available cash to a regular brokerage account, which is a great place to invest money for goals besides retirement. Set up a well-diversified portfolio that fits your timeline and risk tolerance, and stick with a passive investing approach. In other words, once you’ve settled on an investing strategy that works for you, don’t try to time the market. Ignore any short-term market movements, and focus on keeping your eye on the prize.

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