Saving for retirement need advice?

I am 23 and I am starting to save for my retirement. I am not willing to take a lot of risks with my money what would be the best way for me to start slow?

Public Comments

1. Get together with a financial planner and talk about what best suits you and where you're willing to go with funds. The visit will probably cost between $30 and $40 but is well worth it.
2. Put 10% of your income into a Growth mutual fund with low expenses (Vanguard is a good place to look), and do not even THINK about "risk": stocks go up and down wildly, but trend upwards over time. If you put $1,000 in a shoebox under your bed, it will be "risk-free", and be worth $1,000 in 40 years. If you put $1,000 in a "risky" growth mutual fund, it will bounce up and down a bit, but will be worth about $25,000 in 40 years. Which choice really sounds the "riskiest" to you? Volatility is your friend. Regularly invest 10% of your income in a stock mutual fund and you WILL be a millionaire when you retire!
3. Index funds are probably your best bet. That have a low expense and out perform mutual funds over time. They also are diversified by nature. Check Vanguard or Fidelity and look at their index funds. But you are young and you don't need to be conservative in yoru investments. I'm not saying go to Vegas with the money, I'm just saying you can take some risk without really taking a great deal of risk. Time is a healer - if you lose money one year you'll make it back overtime and ultimately make way more.
4. I agree with Lex's answer. Don't worry too much about risk. Since you are starting young, you won't have as much risk because you have lot of time to work with before you retire. If you want a super-safe strategy, pay off all your debts, including the house!
5. The absolute best, safest, surest, almost foolproof way to invest for YOUR retirement is to invest in YOURSELF. Lots of people on here and elsewhere will give you the old song and dance of "stock market, buy and hold, time is your friend" But NONE of them KNOW your situation. NONE of us know your goals, your income, your risk tolerance, your education level, your retirement goals....so how can we give you advice with incomplete information? If you have people telling you "invest in stocks" ask them one simple question, "what was your rate of return off YOUR investments last year in the stock market?" I ask this to EVERY stockbroker who tries to sell me stocks and every one of them REFUSE to show me their personal retirement account or what money they made in their account. If they can't make money for themselves then how can they make money for me? By investing in yourself, I mean that you need to educate yourself on investments and the best way to do that is to study the rich people who ARE getting good rates of return without risking everything in Vegas. Think about it; if you wanted to be the BEST golfer in the world, you would study Tiger Woods, right? IF you wanted to be a top doctor, you would go the the top medical school. So if you want to be rich then study and do what the rich do. They do NOT make thier money in the stockmarket by "investing " in mutual funds; they, like Bill Gates; SELL stock in companies they create. They do not "day trade", they do not watch the ticker tape every hour of every day. Here is what the rich do that the avg. American does NOT do and is the REAL reason they are rich. They live on 60 to 70% of whatever income they earn, they live in middleclass neighborhoods and do NOT :keep up with the Jones, and the TRUE key is that THEY LEARN TO HAVE MONEY MAKE MONEY. They buy ASSETS. So if you want to retire wealth; do what the rich do and buy assets and not liabilities. That simple. Here is a short list of reading material to get you thinking along the right lines. The Richest Man In Babylon. The Wealth Barber. The Millionaire Next Door. The Millionaire Mind. Rich Dad / Poor Dad Series. if you are working for a paycheck and they offer MATCHING 401K then that is a decent start but I would use that for a short term parking spot for my investment funds and in 2009 roll it into a Roth. Then take the education you get between now and then to invest those funds in things that give a better rate of return then the stock market. I am a fulltime investor and look at deals that avg BETTER then 20% rate of return with low risk and often have rates higher then 50% per year. Most people only see how much money they can EARN and then spend 110% of whatever they make. Take jobs for what you can LEARN and not for what you earn and you will be ahead in 10 years. The current real estate market was caused by people who did not understand the loans the were signing, the risks they were taking, and the power of adjustable rates. They WANTED the biggest house they could get and were playing with the Jones. Instead of LOOKING rich, read the books and look middleclass but have a rich bank statement. Here are the numbers on my latest "investment" just to let you know this IS possible for anyone to do. A 4 bedroom, 2 bath house with pool and 1443 sq. ft. house sold to a homeowner here in Las Vegas, NV Feb, 2006 for 300K. One of those "adjustable rate investors". House was foreclosed by bank in early 2007 for 255K. I offered bank 152K, they countered at $169,900 and I accepted that offer. I paid cash for the house and have spent 5K in clsoing costs, paint and a few repairs. Next week I will have it appraised and it should come in at 250K. I am getting a morgage on the house thru Wells Fargo for 6.5% fixed interest for 30 years at 70% Loan To Value. If the house appraises for 250K then the loan will be for 175K and I will have almost ALL of my investment back out of the house. Let's just say that with closing costs; that I still have 5K of my money in the deal so that is my MAXIMUM investment in the house. I will then have 75K equity for a 5K investment. Better then 10% rate of return, right; but wait it gets better. Now I rent the house out for $1400 a month and after paying a property management company, tax, landlord insurance, etc, it will breakeven cashflow for say the next 5 years. At that point the original loan will be less, the value of the house should be back to the 300K level and I will have 150K owed on a 300K house or 150K return on a 5K investment. SO that will give me a ANNUAL return of 30K for the 5K investment. That is an annual rate of return of 600%; still want a 10% rate of return from the stock market??? And better still TAXFREE. If I want to reinvest some of those funds I simply get another loan against the house and pull cash out and reinvest it in more properties. No sale of house, no taxs. If I pull 100K out; I can buy 1,2,3,10 more houses using that money and repeat. I dare ANYONE to tell me they get rates of returns like that, with NO tax liablity in ANY "stock trade" they have EVER heard of. And this is NOT a "special" house. I am doing these EVERY year. I am NOT special and anyone who gets a REAL education on investments can do this too.
6. Use retirement accounts, like a 401(k) or an equivalent if you have access to one. Otherwise, open a Roth IRA. A simple investment choice would be a lifecycle or target date retirement fund. These funds are managed for you, so that your money is automatically diversified, and the diversification is adjusted as you get older to be more conservative (which is what should happen).
7. Regular contributions to a 401 (k) or employer sponsored retirement account would be a good start. Also, maxing out a Roth IRA would also be a good place to go. Then you may want to invest in a low fee index fund and contribute to it regulary (either monthly or quarterly (every 3 months).) You need these because you actually need the risk to keep up with the pace of inflation. As the price of things go up for the next 20 and 30 years (as they will do especially gas) you need your retirement savings to stay ahead of this. That's what keeping up with the pace of inflation means. Simple putting it in a CD or money market and nothing else will be defeating the purpose.
8. Put something away EVERY month even if its not a lot. This is a good article - How to avoid ruining retirement - http://www.bank-software.com/how-to-avoid-ruining-retirement.htm