As a 30-something, rebuilding your life post-divorce can feel daunting, especially if there are a couple of kids involved.
However, if you’ve moved back in with your parents and you’re starting with no debt and a steady monthly savings goal of $3,500, you’re in an incredibly strong position.
Moving back home may feel like a step back mentally and emotionally, but financially, it’s a strategic move that could help fast-track your goals, especially if you’re ready to invest aggressively.
Here’s a breakdown of smart, efficient ways to put that $3,500 to work.
Before anything else, max out your retirement contributions. If you have access to a 401(k) through your employer, particularly one the company matches, make sure you’re contributing at least the full match amount. That’s free money you shouldn’t pass up.
Beyond a 401(k), consider opening a Roth individual retirement account (IRA), income limit permitting (for the current tax year, it’s $150,000-$165,000 for single and head-of-household tax filers).
As someone under 50 years old, you can contribute up to $7,000 for the year. Roth IRAs grow tax-free, and qualified withdrawals are also tax-free, making them ideal for younger investors with a long time horizon.
If your income is too high for a Roth IRA, don’t worry — you can still use a “backdoor Roth” strategy.
This involves making a non-deductible contribution to a traditional IRA and converting that account to a Roth IRA. Each month, consider allocating about $1,500 to your 401(k) and $500 to a Roth IRA, until it’s maxed out.
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Once you’ve hit your limit on retirement contributions, you could open a taxable brokerage account for investing. This type of investment account is held with a brokerage firm that lets you buy stocks, mutual funds, bonds, exchange-traded funds (ETFs) and other products.
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