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For many people nearing retirement, high-growth investing can be tempting. These investments, often called “bets,” promise substantial returns but come with risks.
Conversely, conservative investments provide certain stability but may not keep pace with inflation or offer the growth required to sustain a comfortable retirement. Striking the balance between growth and security is important, especially when you’re just a few years away from hanging up your working boots.
Finding himself in this exact situation, one Reddit user, a 50-year-old married investor with grown-up children, has $1.2 million in tax-advantageous accounts and $136,000 sitting in a high-yield savings account earning 3.8% interest that he considers allocating to high-growth investments or a broad-market ETF like Schwab U.S. Broad Market ETF (NYSE:SCHB).
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“Now that the kids’ college is finished and paid off, I would like to move most or all of it into something with a chance for more growth. Probably won’t need the money for 5 years or so, although I might consider using some of it for a new vehicle if needed so I would like relatively quick access to it,” the investor wrote.
However, the poster wants to strike the right balance between growth and liquidity. With a household income of $250,000 and a 50% company match on their 401(k) contributions, the couple is in a good position but is seeking advice on how to optimize their savings as they approach retirement.
And Reddit has delivered. Let’s take a closer look at the users’ recommendations in the comments.
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SCHB is a Safe and Reliable Option
SCHB was frequently recommended by Reddit members of the r/Bogleheads community. According to the comments, the ETF is a balanced choice for the poster.
“If you won't need it for 5 years, SCHB isn't a bad move. Could also do a mix—some in short-term treasuries or [certificates of deposit] for safety, the rest in [Schwab U.S. Dividend Equity ETF (NYSE: SCHD)] or [JPMorgan Equity Premium Income ETF (NYSE: JEPI)] for yield. Keep some liquid for that new car,” one comment suggests.
One Redditor emphasized the market growth potential over five years.
“With your kids grown up, I'd move some money out of the [high-yield savings account] and back into the market. If you don't need the money for 5 years, moving an additional $30,000-$40,000 back into the market is the move!” he wrote.
This commenter recommended a different ETF, mentioning how important tax efficiency and yield are and how this holding would net the investor extra yield.
“I am in a similar situation and came to the conclusion that [iShares 0-3 Month Treasury Bond ETF (NYSE: SGOV)] was best. [Expense ratio], state tax benefits and a slightly higher rate would probably net you an extra $1,000 per year,” the Redditor said.
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Proceed With Caution With High-Growth Bets
Some Redditors were against the idea of allocating a part of the money to high-growth bets because of their increased volatility, which might not be the best option for someone close to retirement.
“Would you be opposed to buying really solid [real estate investment trusts]? Keep $50,000 in a [high-yield savings account]. Also, check out Brio Direct, they are giving 4.4% in [high-yield savings account]. Rest can go into [real estate investment trusts] if you’re not touching. They pay good dividends,” a Reddit user suggested.
One comment advocated for stability by recommending an ETF that tracks the price of gold and holds physical gold bars.
“Invest in a gold ETF such as [iShares Gold Trust Micro ETF (NYSE: IAUM)],” the comment reads.
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Maintain Liquidity
Several Redditors stressed the importance of keeping a part of the $136,000 liquid, either in a high-yield savings account or a short-term treasury ETF to cover emergencies and possible upcoming expenses.
“3-6 months emergency savings while you're working and 12-24 months when you are retired. If I would be retiring within 5 years, I would just keep the $136,000 in the [high-yield savings account]. Market fluctuations in 5 years are too much for me to put my emergency savings,” a Reddit user commented.
“Keep 12 months of expenses in there. Invest the rest!” another comment says.
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This article 50-Year-Old Nearing Retirement Holds $136,000 In HYSA At 3.8% — Reddit Debates: 'Dump It Into SCHB Or Seek Higher-Growth Bets?' originally appeared on Benzinga.com
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