I am new to this can someone spin me up on this?

I want to retire when I am 55

Max

Well, how old are you?
Obviously this makes a huge difference.

If your employer has a 401K or other retirement plan put in at least as much as you can to max out the benefit your employer gives. This varies.

Otherwise a combination of an IRA and/or a Roth IRA.  The Roth is sweet as you pay NO tax on your gains but the money is taxed before going in. Look at your tax situation to see which combination(s) benefit you most.

You might want to start with an indexed fund while you get your feet wet and learn about the market. You could also do bonds, CDs, Money Markets, etc but their rate of return is generally worse, albeit with much less risk. An indexed fund will give you diversity and, over time, a pretty fair rate of return.

There is also real estate, precious metals, commodities.

Pay attention to your investments. It will make a fair difference when you are ready to retire.




Try not to do what human nature dictates:

You want to buy low and sell high, not the opposite.

Thanks.  I am 30 right now and finally got my head out my ass.

Max

It's a slow forum. Just got started and it is boring stuff to most people. Gotta pay attention to money, though, or it just moves on.

Right now I am going to be watching Fidelity's sector funds and trying to decide what is going to make money in the short term. The Hurricane is going to effect things I figure. Just not sure how yet.

You'll be hard pressed to retire at 55 if you only save at 401K and IRA amounts. You'll probably have to save some more than that unless you really take some risks and do well. I am not advocating that. To each his own. I am 46 and not afraid to take a few educated risks. Generally it works out well if I am paying attention and doing my homework but I am sure no whiz. When you get enough to make it worthwhile think about a financial advisor but always keep an eye on your own shit. Some of them are more concerned about commissions than what is good for you.

If you are 45 or 50, and are now just starting to consider retirement planning, you are NOT going to retire at 55.  Period.  And you are not going to retire at 60 either...

If you are under 30 years of age you have some time.  Retirement at 55 is not hard, but it does take time and it does take discipline.  The younger you are, the easier it is.  The moral of this sotry is "start early".

The process is very very simple.  Save money, invest it wisely, give it time to grow, and don't touch it.  Here are the specifics:

Invest your money where it grow without being taxed-to-death.  You have several options.  You can do IRA's, Roth IRA's, 401(k)s or a few other options for self employed individuals.  Generally speaking the mechanics are similar (except for Roths):  Tax a few pretax dollars, stick em in a retirement account, invest them, leave em alone, withdraw and pay tax when you retire.

If you have company matching contributions on 401(k) , use it.  Many companies will give you fifty cents for every dollar you invest in your 401k (up to 5 ot 6 % of salary).  Stick a $1000, and the company kicks in $500.  That is an immediate 50% return on your money.  Once you;ve hit the maximum for company contributions, stick money in Roth IRAs (if you are younger).

Once in the accounts buy into a diversified portfolio of mutual funds.  Forget pouring all your money into company stock.  If you are young invest heavily in stock mutuals, with little bond exposure.  I'm 37 and I;m about 85 stock mutuals, and 15 Bond.  About 25% of my money (both stock and bond) are in global/foreign mutuals.  If your are under 30 you might want to consider 90% stock /10% bond.  As you get older you genrall decrease stocks and increase bonds.

How much to contribute?:  How much to you want to retire at 55?  I'd shoot for 15% of income.  If you are salting away a measly 5%, you will not get there.  Period.

You need a LOT of money to retire at 55.  If you live to 85, thats 30 years of expenses you have to cover.  A half million dollars sounds like a lot doesn't it?  Its chump change, and a recipe for disaster.  If you retire in twenty years, at age 55, inflation will be doing some evil things.  Everything that costs $1 today will cost $2 then.  A nice modest income of $35,000 today will need to be $70,000 then to be equivalent.  If you retire in twenty years at age 55 with $500,000 in cash, you'll be out of money before you can draw social security (if it even exists)...

How much do you need to retire at 55?  That depends completely on your expenses.  I'm targetting a very modest amount of about $35,000 per year (or whatever it takes to equal that in 2025).  given modest growth and modest inflation, that magic number is about two million dollars...

If you are 30, and want to retire at 55, you have 25 years.  Invest $5000 a year at 7% and you will have roughly $340,000.  That aint enough.  make it $10,000 a year and you'll have just over $1 million at 55.  Again, that ain't enough.  You have but two options:  Save more now, or delay retirement to 60, 62, 65. (or both)

You are NOT going to accumulate Two Million by sticking $1,500 a year into an IRA.  It's going to take some serious saving and some serious investing.  My recommendation is this:

DO direct deposit.  your contributions come directly out of paycheck, and into your 401K and Roth IRA.  Every week you gety paid, your contributions go directly in.  No fuss no muss.  Make the contributions 15% or income, and 20% would defintiely be better.  Learn to live on the remaining 80 or 85%.  Invest the contribs in a diverse portfolio of well managed mutuals and forget about the market ups and downs.  Just chug along ignoreing teh whole damned thing, and make those weekley contributions.  You'll have nothing at first, but inside of a few years it will start to snowball.  THere will be times you 'loose money" . Ignore them.  There will be times you make money.  Ignore those too.  Just keep investing.  In 20  or 25 years there will be asizeable nest egg.

The recipe is simple: Invest a lot,  Invest early.  Invest automatically.  Forget about it and let it grow.

DO direct deposit. your contributions come directly out of paycheck, and into your 401K and Roth IRA. Every week you gety paid, your contributions go directly in. No fuss no muss. ... Just chug along ignoreing teh whole damned thing, and make those weekley contributions. You'll have nothing at first, but inside of a few years it will start to snowball. ...The recipe is simple: Invest a lot, Invest early. Invest automatically. Forget about it and let it grow.

Amen, +1 and all that.

One thing I might add, Maxell27: IF you're not saving anything right now -- meaning you have no concrete plan, (such as "I save/invest exactly $500 per month, every month"), I suggest you not worry for now about where to invest and just focus on saving your money.

When I was 30, I hired a financial advisor for 1 year, and her biggest value-add to me was to set up an automatic deduction from my bank on payday.  It turned out that I didn't notice any difference to my income or lifestyle -- saving was just like paying another bill.  The accoint didn't have a spectacular rate of return, but the key was that I was saving money.  In addition, I maxed out my 401k, and in total my wife & I were saving/investing 25% of our income.  And before we knew it we had a pile of money to invest.  THEN I started looking at where to put the $$$ for the best return.

You can do this without hiring an advisor  (I dropped mine because of this).  There's a thread on this board for ING's savings account, and my friend has ING withdraw a set amount from his account on payday.  EZ as pie.

Like frozenny said, just set it up automatically.  Before you know it you'll be far ahead of 90% of the US population in terms of retirement.

I second everything said here, especially the magic of compounding interest. Couple of things...

I heard it said once if you maxed out the $ you could put in an IRA between ages 18 and 26 (assuming 8% interest) and didn't put in another $ after 26, you'd have more money at retirement  than starting at 35 and contributing for the next 30 years.

I also heard it said if you put $10K in an IRA (assuming 6% interest) the day your kid was born, they'd NEVER have to worry about retirement.


Final thought though..actually, kind of a question... how safe is it to put money away for retirement with the impending deficit? I mean, is the U.S. government gonna declare bankruptcy in the next 30 years the way we're going and confiscate everyone's paper assets and give them to Asia to pay down the debt? I mean we just can't seen to stop the ungodly spending.  How do you protect yourself from a financial crisis. is it better just to spend it all now and enjoy it while you still can???  

ROTH IRA
Do It!

Well I got a Roth IRA and doing a mutal fund.  I am also a Marine and figure I got 10 years left before I retire with 50% of my base pay.  I also plan on getting a job after the Corps and work until I am 55.  Currently I save/invest 15% of my pay.

Max