Best (simplest, easy to understand) way to start retirement saving?
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Anonymous
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Hi-
28 year old here and it's about time I start saving for retirement. After doing some research, I am going to go with a Roth IRA. Some people have recommended Vanguard online. What are some trusted websites that I can start saving on? - Would you recommend Vanguard? Is it possible to start putting money in (weekly) with no initial deposit? Once the money is there, can I wait a little while until I know where to allocate it? |
Anonymous
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Vanguard and Fidelity are the biggest names. Vanguard is great and has a ton of low fee index funds that are good for retirement funds.
Do you work for an employer that has a 401(k) option? If so, you should take that route before funding an IRA. If not, then a Roth IRA is a good idea. You can call Vanguard and ask them some questions, especially about whether you can put in money weekly with no initial deposit. |
Anonymous
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Do you have a 401k with an employer match at work? If you are eligible for a match, do that first, as that is FREE money you would miss out on.
If you don't have a match at work, a Roth IRA is a good next option. If you don't have the money set aside (Vanguard requires $3000 to open a Roth IRA), then T Rowe Price is a great alternative. You just need to set up an automatic debit weekly/monthly etc. https://individual.troweprice.com/public/Retail?src=CorpHome If this is your only/first investment you might want to consider a lifecycle, asset allocation or balanced fund. |
Anonymous
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OP here. Thanks for the quick responses. I do not have a 401k. I am a nanny and am the only employee. I have great employers, but I haven't been here for even a year yet so I have not approached them about any possible retirement options - A very small percentage of nanny employers do this though.
This is my first/only investment - 12:37, what are those three options? Are those through a specific site or general terms? |
Anonymous
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OP, one question I might ask is, before you start saving for retirement, do you have 6 months of living expenses saved for emergencies? Definitely have that first, in an easily accessible savings account. (or one you can access within a few days if you need it).
If that's true, I would go with Vanguard and set up a Roth IRA. Get it to auto-debit each month, max up to the 5k allowed, or whatever you can swing, but 5k being the ideal. For the fund question, I find the simpler, the better. You can look at the 2040 or whatever year retirement funds, for example, and that has a very balanced fund of stocks, bonds, etc. Set it and forget it. Something like these: https://personal.vanguard.com/us/funds/vanguard/TargetRetirementList You want the lowest costs possible with the broadest cross-section of all markets in your portfolio, so that you have the most return for the least amount of risk. Vanguard is known for its very low cost funds so you almost can't go wrong if you just get a total market fund. Make sure you also have both domestic and international, large-cap and small cap, etc. I also recommend reading or following: Dave Ramsey, Suze Orman, Michelle Singletary, and reading A Random Walk Down Wallstreet or a good basic personal finance book. |
Anonymous
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OP here. Thanks again. I don't have an emergency fund to be honest. I have about $1,000 to my name (in savings). In 5-6 months I'll have about $5,000 saved. My emergency fund would ideally be about $10,000. Then there's the potential-first-home down payment of maybe $10,000 (FHA loan?) and also retirement.
I have no student loans, no debt, no balance on credit cards. I've read some Dave Ramsey and have visited the Bogleheads website. Its hard to take it all in, with the what-if's, budgeting (or lack of), planning, uncertainty; but I really want to have "financial freedom" and be as independent as I can. I know this requires quite a bit of savings. |
Anonymous
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12:37 again. Here are example of the type of funds I was suggesting at T Rowe Price.
Retirement 2040 - http://www3.troweprice.com/fb2/fbkweb/snapshot.do?ticker=TRRDX Personal Strategy Growth - http://www3.troweprice.com/fb2/fbkweb/snapshot.do?ticker=TRSGX These funds have a mix of stocks and bonds appropriate to your age. I agree with PPs that building an emergency fund is very important, but it is also important to start saving for retirement, even if it's $50 every two weeks. |
Anonymous
| Easiest is a life cycle fund. You pick a year close to when you retire. I used Janus when I started. I think you should start now, even without an emergency fund. Start small and then increase it by half of any raise you get in the future. |
Anonymous
| Vanguard is owned by all of us who invest there. That allows them to charge cheaper fees as they don't have to make money for some other shareholders. So there's Vanguard, then all the rest of the firms. Just stick with Vanguard. |
Anonymous
| 22:14 Lifecycle seems like what I'm interested in. Now, is that more of a savings account or do I allocate the money once it's there? |
Anonymous
| OP here. I just checked out Vanguard's life-cycle choices. I'm just so confused by the allocation part - I know next to nothing about stocks, bonds, mutual funds, etc - I should find a financial advisor (but that costs money which I don't have!) |
Anonymous
Good for you for starting now! I'm a Vanguard holder as well. Go with a single index fund that tracks the market. Total Stock or something like that. |
Anonymous
| Focus on your emergency savings for now. Once you've met your goal for that, start saving for retirement. In the meantime, you could look into IRA options more. A Roth IRA is better for most people than a traditional IRA. You could just go with Vanguard's life-cycle fund that matches your age/when you expect to retire date. Vanguard will automatically shift the asset allocation in your account as you get closer to retirement for these accounts. |
Anonymous
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Don't go to see a financial advisor. waste of money. read a couple of books or do some research on the internet.
bogleheads.com is the best website. I would go with Vanguard. |
Anonymous
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You should read some personal finance books, here are some good ones for people in their 20s and just starting out:
I Will Teach You to be Rich, Ramit Sethi The Money Book for the Young, Fabulous and Broke, Suze Orman The Automatic Millionaire, David Bach |