Best way to begin saving for retirement?
Hi, I'm a 21-year-old male. I want to start saving/investing for my retirement (the earlier the better). With my income, I fall into the 15% tax bracket. I've done online research but the sheer amount of information is a bit overwhelming. I plan on going to my bank and consulting with one of the financial advisers more about my situation and options, but I figure you guys might provide some more insight into it. I understand the differences between the traditional IRA and the Roth IRA, as well as the 401(k)'s, but I don't know how to chose the proper account for me. I am employed but do not contribute to any sort of company plan at all. Where should I start?
Public Comments
- 401k is an easy place to start. Most advisors recommend contributing the maximum amount allowed. Most companies also match up to a percentage. You can also contribute to an IRA now for credit on 2007 taxes. Depending on where you fall in your tax bracket, will help you determine whether a traditional or a ROTH is the better bet. Congrats on playing it smart and investing early.
- First -if your employer offers a 401(k)....contribute up to the match... Second....Open a ROTH IRA - because those contributions are after tax dollars = and you are in the lowest bracket possible so when you distribute.....it's tax free when you are probably in a way higher tax bracket.... Third - and the most fun......start locking up money in a CD ladder.....open a 6 mo CD.....a few months later open another for....12 mo.....then maybe a a three month.....While the interest earned is minimal....it gets you used to locking up your money for finite periods of time and you may find yourself paying more attention to the financial news and saving money outside a basic savings acct.
- I'm an Aussie, but planning for your retirement is pretty universal. Over here we call our compulsory old age savings "superannuation" or Super. Start saving now. If you don't plan on using the money to buy growth assets, like property, then put it in your compulsory government savings. This usually is taxed at a much lower rate. I'd save some of it and invest it perhaps in a rental property or some other managed investment. This means that if you ever get to 45, still can't touch your '401(k)' but desperately need some funds to pay for your kid's tertiary education or some medical expense, you can liquidate an asset like a rental property to generate funds. I recommend going to your local library and hiring some books on financial management. Best wishes
- If your company offers a 401(k) plan, that is the place to start. If they do not, start a Roth IRA on your own. Also, "Investing For Dummies" is a great intro book to saving and investing, including retirement accounts. Its great that you're thinking about this at age 21. The sooner you start, the further ahead you will be. Good luck.
