5 Things You Shouldn’t Do When Your Savings Reach $100,000

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When your savings reaches $100,000, that’s a milestone worth marking. In a world where 57% of Americans can’t cover an unexpected $1,000 expense, having a six-figure savings account is commendable.

Be careful, though. There are still plenty of mistakes you can make even if you’ve had the foresight and discipline to accumulate $100,000 in your savings. Here are some of the most important things that you should try to avoid when your savings reaches that lofty six-figure level.

Leave It in a Low-Interest Account

You’ve no doubt worked hard to accumulate a six-figure savings account. Why would you do yourself the disservice of leaving it all in a low-interest account?

Even in the high-interest environment of 2023, many major banks still pay their depositors less than 1% on their savings. Meanwhile, numerous online banks — which carry the same FDIC insurance as the banks you may be more familiar with — pay well over 4%.

On a $100,000 balance, that amounts to an additional $3,000 or more in interest every single year, all without exposing your savings to any additional risk. If you’re so risk-averse that you insist on leaving all your money in a savings account, you should at least get compensated as much as you can while you’re doing it.

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Stash It All in a Savings Account

Although you should earn as much interest as you can on your savings, there comes a point where you should move some of your money into a real investment account. Even with a high-yield savings account, you’re still likely to earn less than half of the long-term return of the stock market, which averages closer to 10%.

While you shouldn’t put all of your savings at risk — some should be kept in an emergency fund, for example — if you plan to save for retirement using simply a savings account, you’re highly likely to come up short.

If you keep your $100,000 in a high-yield savings account earning 4% per year, after 30 years you’ll end up with about $331,000. But if you instead earned even 9% from the stock market over the long run, that $100,000 could grow closer to $1.4 million. That’s roughly four times as much money for your nest egg.

Of course, investment returns aren’t ever guaranteed, especially in the stock market, but one statistic that many don’t appreciate is that for all of its volatility, the stock market has never lost money over any 20-year rolling period. That eliminates a lot of the risk from the situation for long-term investors.

Put It All Into a Single Investment

Whether you have saved $100 or $100,000, avoid the temptation to “bet it all” on a single investment. Many investors fall prey to this temptation, hoping to double or triple their money overnight. The problem with doing this is that you’ll be taking on far too much risk.

While there may be a chance that your investment will be a big winner, the damage caused by a big loser could be too much to overcome. Remember, in the mathematics of the investment world, if your account drops in value by 50%, you’ll need to earn 100% going forward just to break even. 

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In other words, think about how hard you worked to save that $100,000. Putting it all into a single investment could wipe out what likely took years to achieve in a matter of moments. While you shouldn’t avoid all risk with your $100,000, taking prudent, balanced risks is a better strategy than speculating, hoping and wishing that a single investment will be a big winner.

Think That You’re Done Saving

While reaching the $100,000 mark is an admirable achievement, it shouldn’t be seen as an end game. Even a six-figure bank account likely won’t go far enough in retirement, which could last as long as 30 years. Once you’ve proven to yourself that you can save that much money, it’s time to bump your savings rate even higher.

If you’re already used to saving 10% of your income, for example, slowly bump that up to 12%, 15% or even 20%. If you increase your savings rate in small enough increments, you might not even notice the money that you’re “missing.” But the small additional sacrifice you make now can pay huge dividends in the long run.

Keep All Your Money in a Taxable Investment Account

As you start accumulating more money, you’ll want to focus on protecting it from taxes. For starters, as your account grows larger, the income and gains it kicks off may push you into a higher tax bracket. This is something you’ll want to avoid if possible.

For your long-term savings, consider using accounts like traditional and Roth IRAs to protect your investment gains from taxation. Traditional IRAs may also provide you with a nice tax deduction on your contributions, while Roth IRAs offer tax-free withdrawals in most cases.

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