Post # 1
Any bees out there start planning retirement at a really young age?
I don’t have a 401(k) option with my work, but I want to start putting money towards it.
I am unsure about IRA accounts. I’m a little confused about about it all. I hear you should stash 18% of your earnings for retirement. I don’t know, though.
Who should I try to contact for info? Google runs me all over!
Post # 3
@jb20: I live in Canada and have RRSPs and I get a pretty good pension with my employer. I also put money into a TFSA and a normal savings account for rainy days etc.
You can never start too early when it comes to saving for retirement. I can’t give you any specific advice since I am not familiar with US retirement/savings accounts, but IMO you should start as early as you can, and save as much as you can (comfortably). If you start in your 20s it’s way better than starting in your 30s or later. It’s very difficult to make up time when it comes to savings/investments. Can you get automatic payroll deductions that put money into a retirement account? That way you won’t ever miss the money.
You should probably book an appointment with someone at your bank who can give you some advice. There are also plenty of websites out there that have retirement calculators and stuff like that so you can get an idea of what you need to do based on your goals.
Post # 4
I’ve had a financial advisor since my mid-teens and have been putting money away into mutual funds and a Roth IRA (in varying amounts) since then.
When I got a real job post-college, both DH and I started investing into 410(k)s (mix of traditional and Roth) and make sure to take advantage of all company matching at a bare minimum (and increase our contributions when we can).
It is really important to start saving for reatirement as early as possible because the compounding interest and earnings makes a huge difference! Talk to a financial advisor and they’ll be able to walk you through all the different options and help you figure out what is best for you and your situation.
Post # 5
I had a 401K for 10 years from a previous job. When I quit to stay at home to raise my kids for a few years, I put that into an IRA – got another job 2 years later and building another 401K.
Post # 6
@jb20: If you are starting with your retirement early, KUDOS to you! That is a very wise move.
You can open a Roth IRA and the yearly limit is $5,500 for 2013. The money has to come from your earnings (not like a gift from grandma). The great thing a Roth is that your own contributions you can take out (not earnings) at any time with no penalty. I don’t advise using this as a savings account and pulling from it regularly or even for big ticket items, but it is a nice benefit should you find yourself in the most dire of emergencies. All the money that goes into it comes from your post-tax salary, so that when you use it at retirement you don’t pay taxes when you use it.
“So you pay taxes on the money now (when you make less and your tax bracket is lower) versus at retirement (when you make more and are in a higher tax bracket).” – as Mrs. KMM said.
If you have more than $5,500 to put away a year, I would also open a 401k if you can. Vanguard and Fidelity are good places to look into if you have to open these accounts on your own.
As far as how much to put away? Well, I say put away as much as you can while still living a moderate lifestyle (aka not resorting to ramen every night). There are general rules – 10% if you want less than what you’re making now, 20% if you want to have a higher salary than you do now. All very general rules.
My H and I have several accounts: two Roth IRAs, two 457b, two Health Savings Accounts. That’s $52,500 going away before we even see it, or about 36% of our income. We want to retire early though.
Then our employers (we have the same employer) include a 14.2% of each of our salaries to a 401a (it’s the education’s world’s 401k). We cannot contribute to that ourselves, it’s a gift from the employer.
At ages 36 and 34, we are over half a million in retirement right now. I have not shared that with many people (no one in real life either!), but we worked very hard to get there!
Post # 7
My plan is to retire at 60, if I can, and FI would like to at 62 (general age). I work with people who are struggling with retirement issues right now, so I would like to have less worry when that time comes for us! I’m in my career field (entry level) and still trying to work into the position I would like to be in. I am also going back to school in September (took a year off for financial reasons) and will obviously be able to contribute more when my income goes up. I figure about 20% would be comfortable for me right now. But 20% of my income now is totally different than 20% of my income in 5 years. When I used a calculator online it said I need to contribute about 56% of my monthly income to retire where I want to, which is not reasonable! Lol.
I am going to talk to a financial advisor, maybe look into a Roth IRA for now and when my salary goes up add a 401(k) or something. I want to have all of my retirement accounts set up and be contributing within 3 years, so I should probably start right away lol.
Sorry if I sound ridiculous or this makes no sense lol.
Post # 8
@sienna76: You have the tax info backwards on the Roth IRAs.
The Roth IRA is the better choice if your tax rate during retirement will not be lower than your current tax rate, as the Roth IRA allows you to pay the taxes now, and receive tax-free distributions when your income tax rate is higher.
So you pay taxes on the money now (when you make less and your tax bracket is lower) versus at retirement (when you make more and are in a higher tax bracket).
Post # 9
Since I’m at it, what about CD’s? Would those be a good idea to get younger, or no? I know they aren’t collecting decent interest (nothing is!). I just wonder if it would be worth it to collect that extra .05% interest if I have the money.
Post # 10
I don’t have any specific plans right now, it’s too far away and there are too many unknowns. Government plans have recently changed for people in their 50s! I have no RRSP yet. It doesn’t make financial sense. DH could contribute to a spousal one for me, but we’re going to wait until I have a job and will make sure things are even later.
We’re saving, and for now that’s good enough for both of us.
Post # 11
@Mrs.KMM: Oops there you go!