If you are just starting to think about retirement, it can be quite overwhelming. Most likely, you have more questions than answers. It’s hard to know not only how much you should be saving, but where. Should you buy individual stocks? Should you buy index or mutual funds? Where should you open your accounts?
Just listing these questions makes me feel overwhelmed for those who don’t know what they are doing. It can be a lot to learn in a short period of time and it is no wonder why people put off saving money for their retirement until late in their career. Then, with having children, it becomes even harder to change your spending habits to save for retirement with all of the extra costs for raising a child. If you are feeling overwhelmed, I wanted to share a simple plan that almost everyone should be able to follow.
An Easy, Hands-off Retirement Fund
The best way to ensure that you save enough money for your retirement is to be aggressive in your savings. Adding extra money to your retirement funds can also give you some cushion if you don’t make the best investments right away. But, even adding a little extra money won’t get you all the way.
Step 1: Utilize Employer 401(k) or 403(b)
Almost any legitimate employer will offer some sort of retirement fund. Many companies will even match a certain dollar amount or percentage. Make sure to put in enough money to take advantage of this match. You can put extra money towards this if you want, but it’s better to focus on other things first, if you ask me.
Step 2: Open a Roth IRA
A Roth IRA is a great investment tool for young adults and should be taken advantage of. If you can afford it, I highly recommend maxing out the Roth IRA each year. Being disciplined now will make it easier as you get older and are paid more. If you start out investing a little bit, your retirement income could suffer. Make a choice to sacrifice now so that you have more options later.
Step 3: Save Any Extra Money
While you don’t just want to have too much extra money sitting around and not “working” to get you high interest rates, it is always a better option to have savings than not. You never know when you will need this for an investment later in life. Whether it is to buy your first home or start buying stocks – you can’t have those options unless you have savings.
Doing these three, easy steps will ensure that you start off on the right track. You may still be asking what to invest in, but at least it will get you started. Start asking questions and finding answers and you will be well on your way in no time.