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I started late. I’m 50 and have about $200k in savings, no debt and a small mortgage with $200k/year in salary. I have $300k in 401k. I’d like to put that $200k somewhere other than the bank. I don't know anything about trading and little about investments so it will need to be a passive investment. Looking for mostly safe suggestions.

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You might want to consider finding a local financial advisor who can better personalize your plan, as there are many other variables that need to be considered:

  • How long do you plan to work before retiring?
  • how much can you contribute to retirement now?
  • What will your expenses be after retirement?
  • Will you have any other income or will you rely solely on your retirement savings?
  • What does "safe" mean to you? Does that mean no possibility of losing value? Or can only lose x% in any given year?
  • Do you have any other long-term goals that you want to save towards?

$500k is a great start but depending on the lifestyle you want in retirement it may need a little or a lot more.

Once you determine how much you'll need at retirement and what level of return you'll need to fund your retirement, the next step is to find investments that offer that level of income wit the lowest risk. Generally you can afford to take some risk if you have 15-20 years left until retirement, and gradually reduce risk as you age to prevent your retirement fund from getting so low in a down market that it can't recover even in a strong recovery.

Funds that track broad indices like the S&P 500 are typically considered the best trade-off of risk and return in passive investing, but you might also want to include some fixed income funds to reduce the risk (but that also reduces returns).

I would stay away from individual equities or other "investments" like whole life insurance or annuities unless you know what you're getting into. Look for expense ratios less than 1% (which would be very high for a passive investment, but not unreasonable for an active investment) and strong 5-10 year track records. If you don't trust the advisor or feel like he's trying to sell you something rather than advise or teach you, then walk away and choose someone else.

Good luck!

  • The advice to invest only in S&P 500 is a poor one, because it completely ignores geographical diversification outside of the U.S. stock market. Also, past track records are not a guarantee of future returns as I said in the other comment... – juhist Nov 5 at 17:31
  • @juhist I did not advise to invest only in the S&P 500. My goal was to give broad examples and not recommend (or forego) specific investments (which are off-topic). I would argue that even government bonds are a poor investment now with historically low interest rates. – D Stanley Nov 5 at 17:38
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There are several options for you and I'm going to keep it generic.

Put your nose to the books and acquire some degree of financial literacy so that you can understand the risks and rewards involved in various types of investments and be able to judge what might meet your needs as well as your risk tolerance.

At the other extreme is to work with a financial adviser who can guide you and possibly hold your hand when necessary. IMO, it takes years takes years to achieve the ability to DIY and at 50, you don't have time to waste.

So perhaps maybe you do both. Learn enough to understand the words to the song and find a reputable adviser based on a recommendation from a trusted family member, friend or professional (your lawyer, accountant, etc.). Past performance and a satisfied clientele is probably the best metric for evaluating an advisor.

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    Past performance is no guarantee of future returns. In fact, in the financial world there is a reversion to the mean, so if past performance has been good, I would say the investment strategy might very well have poorer returns in the future. – juhist Nov 5 at 17:30
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    @juhist - You can say whatever you want about futures possibilities. It's an unknown. But if one wants to be invested and have the potential for gain then one must take the risk. The question is how much effort are you willing to make to ensure that you're not taking undue risk? Learn DIY or seek professional help. Or both. – Bob Baerker Nov 5 at 17:37
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When are you planning to retire? If you're 50, and your retirement age is closer to 70 than 65, and you aren't planning to die immediately after retiring, you have plenty of time for the wonder of compound interest to do its job. I would say your investment horizon is ~25 years.

My recommendation is a portfolio of a cheap government bond fund and a geographically diversified stock index fund. With these two funds, you can construct a portfolio with N% stocks and 100-N% bonds for any value of N. The exact value of N is your most important decision after ensuring that the management fees of the funds are not excessive, and after ensuring the funds are well diversified.

In your situation, I would perhaps pick something around N=60% now, and gradually reduce the value of N as you are approaching retirement age.

Whatever you do, please avoid investing only to the U.S. stock market in your stock part of the portfolio. You should buy European, Asian, Japanese, emerging markets etc. stocks in addition to U.S. stocks. The U.S. stock market is quite highly valued now especially using the Shiller P/E ratio, so underweight in U.S. market might be preferable.

Also, about the government bond part of the portfolio, it has to be government bonds or else you are taking risk in the part of the portfolio where you shouldn't be taking risk. In current situation, interest rates are low so short bonds may be preferable to long ones.

If you cannot find a geographically diversified stock index fund, then you can construct it on your own from U.S., European, Asian, Japanese, emerging markets etc. funds but then you will have a more complex portfolio consisting of more than 2 funds.

  • Probably retire 70 at this stage. Appreciate the info.. thx – Andrew Findlay Nov 5 at 19:32

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