$100K Just Fell in My Partner’s Lap and We Want to Invest for Retirement. What’s the Best Move?

A financial windfall is a terrible thing to waste. Of course, it’s a heck of a lot easier to spend money you didn’t have to work for. As that George Strait song goes, easy come, easy go. And while there’s no problem with treating yourself with a portion of the funds, I do think that someone who’s young can get more long-term bang for their buck by investing, especially as stock markets begin to wobble in the face of tariffs and what appears to be a rolling over for the tech and AI trade.

In this piece, we’ll consider the case of a fortunate couple who has $100,000 headed their way. They’re thinking about investing the proceeds on their retirement — a smart move, regardless of how old they are. And while it’s the market road may have many potholes for investors to roll over in the months ahead, I still think the journey is worth making. But where is a new investor with a six-figure sum to even get started?

Taking advantage of tax-advantaged accounts

First, the couple should weigh how much room they’ve got left in tax-advantaged accounts such as the Roth IRA or 401(k). For a big windfall, I view the Roth IRA as a great place to contribute the funds, especially if one or either member of the family already has a 401(k) through their employer.

What’s better than a company-sponsored 401(k) for retirement? A Roth IRA that’s positioned to grow (via investments in stocks) tax-free for the long haul. For those unsure how much room they have in tax-advantaged accounts, a financial advisor can be of huge help!

Index ETFs for a more simplified approach

Now that you’ve made your Roth IRA (or 401(k) if the Roth IRA is maxed out) contributions, what’s a new investor to do? Between stocks, bonds, and savings, I’d suggest going for stocks if growing your nest egg is a top priority. Of course, higher reward means higher risk.

So, you’ve got to be able to keep your emotions in check, especially in times of market volatility. To better deal with a choppier market, perhaps automating stock purchases over time beats investing the entire $100,000 at once. If the S&P 500’s latest spill is just the start, you’ll be able to average down your average cost basis and may actually hope for stocks to continue to fall so that you can get lower prices!

When it comes to stock (or bond) investments, the Vanguard S&P 500 ETF (NYSEARCA:VOO) is a simple and easy way to go. With the VOO, you’re ensuring minimal fees will eat into your market return over time. Of course, there are a ton of other ETFs (passive, active, specialty, and otherwise) to consider, I do think that those with a set-and-forget mentality can stop at the VOO. If there’s one ETF to know, it’s that one.

Stock-picking your way to results

By investing in the S&P 500 in an ETF like the VOO, you’re getting a market return. For new investors willing to put in the analysis, stock-picking could be the way to get results. Of course, beating the S&P 500 (the market) is easier said than done.

Either way, if you’re like many and view the market as pricey, perhaps buying value stocks (or at least stocks you view as undervalued) could prove a smart strategy. Of course, there are value ETFs to consider if you’re looking for a more hands-off approach to tilting towards lower valuation multiples.

In any case, by picking your own stock, you won’t have to worry about expense ratios. Though, you may have to pay a commission right off the bat. If you’re investing a sizeable sum for the long haul, though, such commissions are a drop in the bucket, especially if you have no intention to trade.

Additionally, stock pickers can follow in the footsteps of investment legends, like Bill Ackman, with deeply-discounted stocks like Nike (NYSE:NKE). While following investors without doing your own research is ill-advised, I do think staying in the know with what the “big money” is up to can point some in the direction of value.

In the case of Nike, it’s down 56% from its 2021 highs. It’s a beloved brand that’s going through hard times. With a new CEO and game plan to jump higher, though, shares certainly seem tempting.

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