Personal Finance

You probably have multiple goals for your money at this stage. The best way to plan, save and invest is to do so for each goal separately.

Fully fund your retirement

Saving for retirement can’t wait by this age, so fund this goal first. Aim to save 15% of your pretax salary per year, including any employer match. Take advantage of Roth IRAs, which differ from traditional IRAs because you contribute after-tax dollars today but pay no taxes when you withdraw money. If you file your taxes jointly with your spouse and your modified adjusted gross income is less than $186,000, you can each contribute up to $5,500 to a Roth in 2017.

With retirement still a couple of decades away, a simple portfolio such as one target-date fund still meets your needs (see the previous section for more on target-date funds). The Price fund currently holds 86% of its assets in stocks.

Consider a college-savings account

State-sponsored 529 plans, which let investments grow tax-free, are typically your best bet for college savings (see How to Pay for College). Check to see whether the best option is your home state’s plan (most offer a tax break for using an in-state 529 plan) or whether an out-of-state plan is better. (See The Best College Savings Plans.)

The portfolio we recommend assumes college is still at least 10 years away, and therefore it holds 60% in stocks, diversified between two broad index funds. If these funds aren’t available in your college-savings plan, consider an age-based managed portfolio. These portfolios are similar to target-date funds; they hold a mix of stocks and bonds and will reduce risk as the first tuition bill approaches.

Protect money for a home

Our model portfolio assumes you will purchase a home in three to five years, and it holds just a sliver of large-company U.S. stocks. This portfolio and others hold taxable bond funds, but well-heeled investors may be better off with tax-free municipal bond funds.

Hire a robot

Too many goals to juggle? Consider a robo adviser. As part of its basic plan, Betterment lets you set up multiple portfolios to save for different goals and time horizons. For a more human touch, we like Schwab Intelligent Advisory and Vanguard Personal Advisor Services, both of which pair automated investment management with basic financial planning with an adviser (see Robos Get the Human Touch).

Portfolios

Retirement
100% T. Rowe Price Retirement 2050 (TRRMX)

College savings
45% Schwab Total Stock Market Index (SWTSX) or ETF alternative: Vanguard Total Stock Market (VTI)
15% Vanguard Total International Stock Index (VGTSX) or ETF alternative: Vanguard Total International Stock (VXUS)
25% Metropolitan West Total Return Bond M (MWTRX)
15% Pimco Income D (PONDX)

Home down payment
20% Fidelity 500 Index (FUSEX) or ETF alternative: iShares Core S&P 500 (IVV)
50% Metropolitan West Total Return Bond M (MWTRX)
30% Vanguard Short-Term Investment-Grade (VFSTX)