I can talk your ear off about investing for retirement. It’s a passion I found a few years ago after getting myself out of debt. I’ve read book after book, blog after blog, and I am big fan/lurker of the FIRE Reddit thread (Financial Independence Retirement Early).
I’ve quickly learned it’s not a subject most of my friends are passionate about or even have in their purview. The rare chance a friend even asks me for retirement advice, I usually lose them after a few minutes, if we even last that long. It either annoys people or puts them to sleep.
For this blog, I’m going to boil my retirement investment advice down into the simplest steps possible. This is geared towards people that want to be set for retirement but don’t want to put in the time to self-educate. You just want to know the easiest steps you can follow to be in the clear when you are 65. If you would like me to expand on any step, please reach out, I’d be happy. However, if you just follow these steps, you will be A-Okay in your golden years.
O-Man’s 2 Minute Guide to Retirement Investing
- Open up a 401k with your employer (or 403b) and an IRA (Independent Retirement Account) with Vanguard. If you are eligible, make the IRA you open a Roth IRA.
- Invest in Vanguard Index Funds for your 401k (if they offer it) and IRA. Vanguard’s low fees can save you hundreds of thousands of dollars in the long run. To keep it simple & easy, invest in retirement date funds. Which one? Simply pick the year you plan on retiring and invest in that fund.Example: If you want to retire in about 30 years? Then invest in the Vanguard Retirement 2050 Index Fund.
- Invest at least 10% of each paycheck into your 401k and max out your Roth IRA every year (IRA/Roth IRA limit is $5,500 for 2018, and you have until tax filing in April to contribute for 2018, and the limit increases to $6,000 for 2019). As you get raises, invest more into your 401k, try to do 1% more a year, and get to at least 15%. if you make good money or are a great saver, also max out your 401k contributions ($19,000 for 2019).
- Don’t touch your accounts and let compound interest do its magic. The market will go up and down, doesn’t matter; keep investing. In the long run, you will see great progress and returns.
- For any extra money, after you have maxed out your tax-advantaged accounts, open a taxable investment account with Vanguard and invest in low-cost index funds like VTSAX.
- Retire with a boatload of money in your accounts. You will have saved on your taxes every year and will most likely be a millionaire.
Further Steps & Reading:
1. Get yourself out of every debt that’s not your mortgage.
2. Read these three books:
a. The Simple Path to Wealth
b. The Boglehead’s Guide to Investing
c. The Richest Man in Babylon
4. Invest in yourself through taking courses and self-education, so you can increase your earnings and have more money to save.
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