Investing for retirement

Aug 06

Do you want to invest for your retirement? I don't know about you, but I want to retire some day so I'm investing for my retirement! But it's so complicated! What should you do to get started? Start with your employer's 401k plan and then open a ROTH IRA.

For your employer's 401k plan invest enough to get the maximum employer match. If your employer will put 4% of your salary into your 401k, but only if you put in 6%, put 6% of your salary into your employer's 401k plan. It's an automatic 4% pay raise plus it will grow until you're ready to retire and compound interest is your friend! You can put more of your salary into your 401k plan, but the minimum to put in is the amount that is required to get the maximum match from your employer.

For a Roth IRA, you want to open a Roth IRA with any broker and put as much as you can afford into it, up to a maximum of $6,000 a year. If you can afford to put $50 a month into it, put $50 a month in it. If you can put $500 a month into it, put $500 a month into it. Then invest 80% of the money in your Roth IRA in an Index Mutual Fund such as FXAIX and invest 20% of the money in your Roth IRA in a Bond Index Fund such as FXNAX. So if you have $1000 in your Roth IRA, put $800 into the Index Fund and $200 into the Bond Fund.

Keep putting money into your Roth IRA and every 4 or 5 months rebalance it back to an 80/20 ratio. Over time one of the two funds will grow faster than the other one, and they take turns growing faster. If you have $1,000 in your Roth IRA and $780 of it is in your Index Fund and $220 is in your Bond Fund, sell $20 out of your Bond Fund and invest that $20 into your Index Fund.

What this does is sells mutual funds when they're high and buys them when they're low and combines that with the power of compound interest. According to Warren Buffet, this is the best way to invest and investing this way out performs the expert investors every single time without doing all of the work that they do!

An easier way to do this is invest in a Target Date Fund. If you do that you'll pay more in fees, but the fund managers will do the automatic rebalancing for you. That's a true "set it and forget it" retirement plan that will last you forever.

Don't take any money out of your 401k or your Roth IRA until you're retired though. There are rules about what you can take out and large penalties if you take money out before you retire so it's best to wait and let that money grow until you retire. But when you retire you'll have a huge chunk of money waiting for you! And if you only take out a little bit of money at a time it will keep growing until you need it!

I hope this advice is useful. We make great fake paycheck stubs, but we also offer great financial advice too! Do you want to invest for your retirement? I don't know about you, but I want to retire some day so I'm investing for my retirement! But it's so complicated! What should you do to get started? Start with your employer's 401k plan and then open a ROTH IRA.

For your employer's 401k plan invest enough to get the maximum employer match. If your employer will put 4% of your salary into your 401k, but only if you put in 6%, put 6% of your salary into your employer's 401k plan. It's an automatic 4% pay raise plus it will grow until you're ready to retire and compound interest is your friend! You can put more of your salary into your 401k plan, but the minimum to put in is the amount that is required to get the maximum match from your employer.

For a Roth IRA, you want to open a Roth IRA with any broker and put as much as you can afford into it, up to a maximum of $6,000 a year. If you can afford to put $50 a month into it, put $50 a month in it. If you can put $500 a month into it, put $500 a month into it. Then invest 80% of the money in your Roth IRA in an Index Mutual Fund such as FXAIX and invest 20% of the money in your Roth IRA in a Bond Index Fund such as FXNAX. So if you have $1000 in your Roth IRA, put $800 into the Index Fund and $200 into the Bond Fund.

Keep putting money into your Roth IRA and every 4 or 5 months rebalance it back to an 80/20 ratio. Over time one of the two funds will grow faster than the other one, and they take turns growing faster. If you have $1,000 in your Roth IRA and $780 of it is in your Index Fund and $220 is in your Bond Fund, sell $20 out of your Bond Fund and invest that $20 into your Index Fund.

What this does is sells mutual funds when they're high and buys them when they're low and combines that with the power of compound interest. According to Warren Buffet, this is the best way to invest and investing this way out performs the expert investors every single time without doing all of the work that they do!

An easier way to do this is invest in a Target Date Fund. If you do that you'll pay more in fees, but the fund managers will do the automatic rebalancing for you. That's a true "set it and forget it" retirement plan that will last you forever.

Don't take any money out of your 401k or your Roth IRA until you're retired though. There are rules about what you can take out and large penalties if you take money out before you retire so it's best to wait and let that money grow until you retire. But when you retire you'll have a huge chunk of money waiting for you! And if you only take out a little bit of money at a time it will keep growing until you need it!

I hope this advice is useful. We make great fake paycheck stubs, but we also offer great financial advice too!