Hello, I really want to get a retirement fund going with that extra 10% I won't be giving the morg. I'm willing to put down 20% of every paycheck at the moment.

I'm going to be 20 in January and am excited to have time on my side. I work 2 low paying jobs and am paying for community college. Idk what I want to do yet, but that's a different discussion. I live with my tbm parents rent-free but plan to move out soon (within the next year: by summer 2016 for sure) because I want to be independent and they're moving to Utah. I do not want to live there. Period. I own a car and pay for my own gas/ insurance/maintenance and I have my own phone plan. I have >$1000 saved for emergencies

What's the best way to save/invest as much money for RETIREMENT? My jobs don't offer 401k.. Can I contribute to some sort of fund every month? Who can I talk to that will lead me in the right direction? Thank you!

Yes, you can start saving for retirement right away, and you can contribute to a fund every month.

I suggest reading short books by John Bogle. What he basically says is to invest monthly in an S&P 500 indexed fund. No real need for financial advisers at this point. Once you invest your money, keep your paws off it until you are ready to retire.

You might want to consider opening an account at Fidelity or Vanguard. Both are relatively inexpensive and are legitimate outfits.

Good luck!

Tax-deferred IRA is the way to go.

If you're on a really low tax bracket today, you may want to consider a Roth IRA. Some links:

https://www.fidelity.com/retirement-ira/overview
https://investor.vanguard.com/what-we-offer/iras/steps-to-open-an-ira?WT.srch=1

I like Fidelity, as they've been very forthright with the money I have with them.

With the Roth, you pay taxes today, not at withdrawal. You may pay fewer taxes overall as a result; that said, given that you're just started, there'll be a sizable opportunity cost associated with the reduced capital.

You can generally put about $5,000 a year in an IRA, tax-deferred.

I would increase your emergency savings first. Then open an IRA. I like Roth IRAs. Since you are so young, you can go with a higher percentage of stocks as opposed to bonds, even 100% stocks if you so choose.

Look for a no-load fund, but also educate yourself about expense ratios and back-end fees. Vanguard, Fidelity, and T. Rowe Price are all reliable companies. There are others as well. As Count Chocula said, you can go for an index fund (such as a S&P 500 index.) This would make your decision a very easy one. These kinds of funds mirror the stock market as a whole. Or you can go for a target-date fund (i.e. Retirement 2060,) a stock fund, or a balanced fund (one that has both stocks and bonds.)

Once you open an account, invest a steady amount each month, i.e. $50 or $100 each month. Ignore the ups and downs of the stock market. This is called dollar/cost averaging. Over time you will make a nice amount of money. Time is an investor's friend.

Start reading about investing. I particularly like Peter Lynch's books. He has written a book called, "Learn to Earn" that is aimed at young people such as yourself. His books, "One Up on Wall Street" and "Beating the Street" are classics in the genre. I would also listen to anything that Warren Buffet has to say -- he is one of the most successful investors ever. Read magazines such as Money and Kiplinger's -- not so much for specific investment advice (which you should take with a grain of salt) as an overview of how to manage your money. These should be available at your public or college library. My public library allows borrowers to check out older copies of these periodicals.

Morningstar is a terrific resource for evaluating fund performance;

http://www.morningstar.com/Cover/Funds.aspx

It is more important that you get going than if you find the "perfect" fund. Pick something sensible and have at it. You can always transfer funds later if need be. Good luck!



Edited 1 time(s). Last edit at 08/08/2014 08:33AM by summer.

I agree with the first part of this. Save up 4 to 6 months living expenses (total living expenses for after you move out). Put it in a CD at the bank. While going through this process, research and figure out where to start saving for retirement.

The 4 to 6 months living expenses ensures you never have to withdraw and pay a penalty in case of an emergency.

In short...forget about saving for retirement until this is done.

I would second vanguard. My 401k is through them, and I am impressed so far. Once I get my emergency fund in place and my backlog of expenses cleared out (moving cross country is not cheap...) I plan to start investing more heavily with them.

Some great advice here on the above posts. I wish somebody would have pulled me aside when I was 20 to help me get started right. My philosophy at the time was, get a raise-buy another payment.(ill-advised)
Today, I'm nearly debt free (less the house) but it has taken awhile (mid 40's).
I will definitely help my children start off right. Congrats on your early maturity.

And if all else fails - go to Vegas and put it ALL on Black - one spin to win. ;)

First, great idea! Saving when you're this young is so important to build a solid future. I started saving at 25, and while I don't have enough to retire yet, I have a good start.

Here's my advice:

Without a workplace plan, you have a choice of IRA types: Roth and Traditional. With the traditional IRA, you defer taxes until you take the money out. If you take the money out before you reach age 59.5, you pay substantial penalties. With a Roth, you can't deduct your contributions from your taxes, but your earnings grow tax-free and you can withdraw your contributions at any time.

Also, BOTH types allow you to withdraw up to $10K to buy a first house without penalties. If you take the money out of a traditional IRA, you will pay taxes on it just as you're also facing huge home-purchase expenses. So if you plan to save for a house, a Roth might be better.

IF I were you, I would open a Roth and invest the money in a low-cost target-date retirement fund. Target-date funds are single funds with investments diversified based on the year you plan to retire. (A 2020 target-date fund is much more conservative than a 2040.) Put your 10 percent in there, and it will grow (hopefully). Then if you want to take out your 10K for a house in a few years, you'll have it.

I second Summer's recommendation for Vanguard. Their funds have much lower costs than some other firms.

Also, when you get a full-time job with a workplace retirement plan (401k or 403b), those will be tax-deferred accounts. A Roth will help you diversify your tax liability.

First, though, fund your emergency savings. That's what will save your butt in these early years when tuition is due the same month that the car dies.

Hope this helps!

Go to mistermoneymustache.com. He's a retired programmer with a wife and child. He retired at 30. Start at the beginning of his blog and read every article, maybe 1 a day. He will teach you more about money in a month than your parents did in 20 years. You don't have to take his advice, but you'll be winning if you try to understand it.

I also second the Vanguard Roth IRA suggestion.

Here is a short booklet written by Bill Bernstein, a well respected author, that echoes much of the advise others have provided upthread. It is aimed at Millennials and is the best introduction to the world of investing I have ever read.

https://dl.dropboxusercontent.com/u/29031758/If_You_Can.pdf

If you have considered starting your own business, or otherwise being self employed, you can open what is called a Self Directed Solo 401K.(you can also set it up as a Roth Solo 401K) It allows a lot more flexibility and control over your investments and includes investment options such as real estate, and physical precious metals. You have total control of your money, total control of investment options, larger loan or borrowing amounts from your account for any reason, and you can contribute a much greater percentage of your income than traditional IRA programs.

http://www.bankrate.com/finance/retirement/solo-401k-for-self-employed.aspx

For full control and flexibility it's best to set the plan up with an administrator that allows investments outside of their portfolio offerings.

http://www.broadfinancial.com/solo-401k



Edited 2 time(s). Last edit at 08/08/2014 03:26PM by braindead.

Financial planners have 1 thing in mind when dealing with you, and that is their commission.

Study 2 things…

1 Roth IRAs.

2 Selling covered calls.


The selling of covered calls is allowed under some Roth IRA rules. If you do the transactions through an online account such as Etrade, TD Ameritrade etc, the fees are quite competitive.

The risk involved in selling covered calls is if the price of the stock drastically reduces. I do not know the ins and out of stock picking in these matters so I all the stocks I use for this are in the Berkshire Hathaway portfolio.

I figure Warren is a better stock picker than I am.

I subscribe to this financial philosophy:

What are the rich people doing?

Rich people in their twenties are investing in themselves to maximize lifetime earnings.

Rich people don't carry debt. They can afford to pay cash and they do.

Though it is great you want to save for retirement, you might get more return if you spent it getting a degree.

IMO It doesn't make sense to start saving for retirement if you haven't built up an emergency fund or taken care of your education and housing.

If an employer is doing matching funds, that's free money so you should get in on that. But if there are no matching funds tying up your money for 45 years might not be the best move right now. Especially if it compromises what you will earn over the next 45 years.

Build the 6-month cash cushion

Also start building a fund for a downpayment on a house
c
If you go to a university you may also need $ for tuition.

IRAs have the most advantage for those in higher tax brackets, so don't worry too much about not getting funds into tax-deferred accounts at your stage in life

I'm far from a "financial expert", but here's what I've done and its worked quite well for me.

I just turned 30, and with my first job at age 18, had a 401K offered through my employer. I faithfully put money in it every paycheck (I believe 5% with an employer match) I left that job at age 25 and started waiting tables (more money in my pocket that way vs. working a minimum wage job in my small town) I don't like the idea of the stock market. Since I am still fairly young, I'm not 100% convinced that the stock market will even be around when I get to retirement age. Rather than roll my 401K into an IRA, I cashed it out (and took a bit of a hit) and put it into tax liens. In Montana, these earn interest at 10% per year, and after three years the property can be foreclosed on and is mine free and clear after a very easy quiet title action in the court if the owner does not pay off the lien. I've had good success with this. Its not 100% guarenteed--I've never lost money, but I have broke even on a couple properties that got paid off within the first year. When I foreclose on a property and sell it, I take a certain percentage of the money and put it into new tax liens, and the rest I put into a CD where it is reasonably accessible to me should I need it.

I also bought my first house at age 20. Best thing I ever did. I wasn't making much money (at the time around $7.50/hour) but had excellent credit and qualified for a USDA loan. I lived in that house for five years and sold it when I got married. DH already owned a house, so I took my profit and invested in a rental property that provides me a good income every month. Now I work as an advocate for victims of domestic violence, which is not a high paying job, but I always have enough money to get through the month and a nice amount in savings and CDs. My vehicle is paid off, my student loans are paid off, and I have no debt to my name. Its a lovely feeling =)

I'll be the first to admit that this way isn't for everyone, but its worked well for me.

Edited to add: The BEST financial advise I can give you is that when you get married (assuming someday you will) DO NOT combine any of your finances! DH and I have kept all of our finances separate, and we NEVER fight about money. Montana is a separate property state, so even though we are married we are considered sole owners of what is titled/deeded in our names. One vehicle is registered to me, one vehicle is registered to him. He pays all the maintenence/insurance/registration on his, and I pay it on mine. My cell phone is provided by my employer, so he pays his own cell phone bill. We divided up the other household bills when we got married. We never have to talk about bills or money, it just gets taken care of. We trust each other and we're both very frugal, and its nice not to worry about. I can't imagine being in a relationship where I had to manage his money. If I find something I like at the store and I can afford it, I buy it, and don't have to justify it to anyone. I earn my money, and he earns his, and we should both be able to spend it the way we see best.



Edited 1 time(s). Last edit at 08/08/2014 06:42PM by westernwillows.

I think that you have some good advice thus far with respect to Vanguard, IRAs and emergency funds.

I'll add one more bit of information. I've probably spent 2000+ hours, researching investing over the last couple of decades and the single best book I have found is "The Four Pillar of Investing" by William Bernstein. He also has another book called "Asset Allocation" that has a bit more math.

Bogle's (Vanguard's ex-chairman and founder) books are also very good and Bogle and Bernstein have similar investment philosophies and give similar advice (e.g. low cost index funds) but I like Bernstein's book a little more because I think that it is more complete. He discusses the history of markets, market behavior and psychology, the case for indexing and gives examples of how to build a portfolio of funds.

Historically, if you do nothing except read Bernstein's book and implement the suggestions you'll out perform the great majority of professional money managers and that includes the guys with MBAs from Harvard and Stanford that are earning 7 and 8-figure salaries and in case you haven't figured it out part of the reason you'll out perform them is that for the most part you will not be subsidizing their salaries.

Do whatever you can to avoid student loans. They are a killer, and can't be discharged in bankruptcy. If you have money beyond what you will need for tuition, buying a rentable house is a good idea, especially at these low interest rates. Find one in a good neighborhod.

If you buy a fixer upper you can additionally acquire some good lifetime useful skills. I've built 3 homes doing the labor myself. The skills aren't that hard to learn.

Despite what so many others above have said, I would avoid paper assets in any form. We're currently experiencing a market bubble due to the flood of money from the fed, but that can change. If really bad things happen paper can become worthless. You can probably still rent out (or live in) that house though.

Yes, I'm a financial advisor with Edward Jones in Austin, TX. While I agree with most of the above comments, without knowing you, your risk tolerance, debts, budget, etc. to offer advice on any investment strategy is premature.

Not all firms and brokers are cut from the same cloth. There is no shame in getting some personal help if you do not have the time or inclination to become an expert on this topic.

Our consultations are free. If after meeting with a broker you do not see value in what they are offering, do it yourself. Time is your friend, get a free consultation!