I’m 23 and have maxed out my Roth IRA. Where should I save next?

Anne asks: I’m a 23 year old making $60k a year. I have a $10,500 emergency fund, a fully-funded Roth IRA, and a partially funded Roth 401k (saving $250 a month after taxes, with no employer match). Both the Roth IRA and Roth 401(k) are in target date mutual funds. I save about $1,000 a month outside of my 401k, which has been going into the emergency fund/Roth IRA, but now I need to figure out where to channel these savings now that those two are nearing full funding.

I also have $10,000 in a tax-free bond mutual fund. This money was a graduation gift from my parents “to get me started” a few years ago. I ended up not needing to tap into it, and now I’m not sure what to do with it. So I don’t know what to do with this $10k, plus the $1k I save every month. Should I top off my emergency fund? Open a taxable brokerage account? Put the $1k a month into the bond fund?

I have no consumer debt, as I pay off my credit cards every month. I have $20k in student loan debt at a very low rate that I don’t have any interest in paying off early.

Hi Anne,

Congrats on being in such a great financial situation. At 23, you’re already killing it!

My recommendations for your situation are pretty simple. I’d say your emergency fund should be six times your monthly expenses. If you’ve already got that covered with the $10,500, great. If not, top it off.

Next question: What’s your next big goal? Buying a car? A home? An income property? Taking time off to travel?

Even if those goals are a few years out, I’d figure out how much you’ll need for each and what you need to save each month to get there. I’d take the $10k and divide it up to “seed” each of your goals and then add monthly contributions. That way, when it’s time to do those things, you’ll have the cash ready to go.

As far as where to put the money, I’d say go ahead and open a taxable brokerage account; but stick to no-load mutual funds and/or exchange traded index funds. You can tolerate some risk while you’re saving for these goals. Just be sure to leave the emergency fund in a savings account, however paltry the yield.

Good Luck!

David @MoneyUnder30