Would you like to retire some day?
August 26, 2020
Would you like to retire some day? I don't know about you, but I want to retire and enjoy living instead of working for the rest of my life! And Social Security isn't enough to support most of us after we retire. It's a great supplement to our income, but it's not enough to replace what we earn so we need to save and invest too.
You want to do two things. First you want to open a Roth IRA and second you want to invest in your employer's 401k or 403b plan if they have one.
First the thing that everyone can do. Open a Roth IRA with any of the online brokerages and set up an automatic transfer from your checking account into your Roth IRA. Even if it's only $25 a week it's something and it will add up to a surprising amount over the next 20-30 years! Then in your Roth IRA set it up so that your automatic deposit goes into a Target Date Fund. I have my account with Fidelity and I have one of Fidelity's Freedom Funds, but both Vanguard and T. Rowe Price are also excellent choices. The most that you can put into a Roth IRA is $6,000 a year and if you can afford that much, do it! But if all that you can afford is $25 a week, do that instead. Every penny counts and it will add up over time through the magic of compound interest.
Second, if your employer has a 401k or 403b plan enroll in it and put enough money in it to get your employer's maximum match. For example, if I put 6% of my income into my 401k my employer matches it with 4% of my income, which is an immediate 4% pay raise! Then if your employer has a Target Date Fund invest everything in your 401k in that fund and ignore it. It will grow over time and make compound interest your friend!
The bad news is if you put money into a retirement plan and then take it out before you turn 60 you'll pay the IRS way too much money! So only put money that you won't need until you retire in your retirement plans.
The good news is if you do this for 30 years you'll end up with a surprisingly large amount of money to live on when you retire! We all want a stress free retirement and this is the easiest way to get started saving towards one. If you start doing this soon enough you'll have more money when you retire than you have now, which is incredibly exciting! Don't believe me? Go here and plug in $100 a month for 30 years at 9% interest and see how much money you'll have! Then imagine if you put $200 a month into savings! Compound Interest is a great thing and it is how you can start saving now and retire in comfort when you're ready to retire.
While you're here, don't forget to check out our great pay stub generator! It's quick and easy to use and the novelty check stubs that it makes look great hanging up on your office wall!