Night Elf Posted March 11, 2014 Share Posted March 11, 2014 What's the best advice I can give to my 21 year old about saving for retirement? Her current job has no benefits so this would be all on her own. She has a regular savings account. Is there something better she can choose, something that she wouldn't have to contribute too much money per month? Quote Link to comment Share on other sites More sharing options...
vonfirmath Posted March 11, 2014 Share Posted March 11, 2014 I'd look into Vanguard. Quote Link to comment Share on other sites More sharing options...
T'smom Posted March 11, 2014 Share Posted March 11, 2014 I don't have any specific investment advice, but I would give her a couple of books that emphasize things like 'pay yourself first' having the money direct deposited so you get used to not even seeing it, charts that show how much more money you can make if you start early rather than late. I can't think of anything off the top of my head, except maybe the Millionaire Next Door. It shouldn't be too hard to find something. Quote Link to comment Share on other sites More sharing options...
umsami Posted March 11, 2014 Share Posted March 11, 2014 Honestly, just do it regularly. She can set up a Roth IRA. I'd try Charles Schwab, Fidelity, or Vanguard. (Not sure who has the lowest fees for transactions.) In general, though, at this age I'd be far more concerned about getting into credit card debt. Quote Link to comment Share on other sites More sharing options...
trinchick Posted March 11, 2014 Share Posted March 11, 2014 I'll second the recommendation for a Roth. At entry-level income, her tax rate shouldn't be too high (sorry if that's presumptuous), so it may make sense to pay the taxes now rather than later. Also, with the Roth you can take out the initial contribution later without penalty. This could come in handy if she ever wanted to use the money for a down-payment on a house. Any growth should be left in the account, or there will be a penalty assessed. When I graduated from college I read a book called "Get a Financial Life" (it's been updated since then so still relevant). It covered all of the basics: insurance, retirement, record-keeping. Lots of good graphics, including those eye-opening charts that have different scenarios regarding starting to save early vs. later and the huge difference it makes on the final tally. Also discusses credit card debt and provides equally eye-opening charts documenting how a $50 pair of shoes can cost you many times that amount if you just make minimum payments. Good for you on guiding her in this area! I think a lot of families miss the opportunity to pass along important information by being unwilling to discuss finances openly. Quote Link to comment Share on other sites More sharing options...
carriede Posted March 11, 2014 Share Posted March 11, 2014 Encourage her to save as much as she can (after ensuring she can cover her expences without credit card debt). Compound interest starting at 21 is INCREDIBLE. I second using a Roth IRA. I don't believe there's a monthly minimum, so she can contribute whenever. Quote Link to comment Share on other sites More sharing options...
JustEm Posted March 11, 2014 Share Posted March 11, 2014 At that age its likely a Roth IRA would be the most beneficial. Contributions are taxed the year you put them in but earnings are not as long as you don't withdrawal early. you can take contributions out penalty free whenever. Earnings can be taken out early under some circumstances (when purchasint first home.) Quote Link to comment Share on other sites More sharing options...
prairiewindmomma Posted March 11, 2014 Share Posted March 11, 2014 Roth IRA. Ideally she should try to save 10-15% of her income. Quote Link to comment Share on other sites More sharing options...
Mrs Mungo Posted March 11, 2014 Share Posted March 11, 2014 The best way to save for retirement: 1. Stick it in any Roth IRA. 2. Don't touch it, ever, until you're ready to retire. Quote Link to comment Share on other sites More sharing options...
Beth S Posted March 12, 2014 Share Posted March 12, 2014 The best way to save for retirement: 1. Stick it in any Roth IRA. 2. Don't touch it, ever, until you're ready to retire. John Green! Author of Fault in our Stars! Great advice! Quote Link to comment Share on other sites More sharing options...
milovany Posted March 12, 2014 Share Posted March 12, 2014 Our oldest son is 20 and we've been hitting on this topic lately, too. I just read the other day that putting $2000/year. into a Roth IRA for the ten years between 20 and 30 -- and then not touching it until retirement -- will net $340,000 on an initial $20,000 investment. If you don't start putting the same amount of money into the Roth IRA until you're 35, and then do so until 65 (so 30 years instead of 10), you'll invest $40,000 more and end up with $73,000 less! That early start makes a huge difference. I wish we had this to do over, and we've been encouraging our son to consider it now that he's working full time. The other thing I'd have him do if he could/would is buy a small, solid house somewhat near the university, live in a short while and then turn it into a rental. Get it paid off as quickly as possible, and then do it again 2-3 times. He may not live here in our town long, but my husband and I plan to and could manage it for him. We'll see. Quote Link to comment Share on other sites More sharing options...
LucyStoner Posted March 12, 2014 Share Posted March 12, 2014 1. Save early. Save often. Don't touch what you save. A Roth is the best option for most young savers. Max it out each year if at all possible. We set up our retirement accounts young and it has been a big relief. 2. Avoid credit card and consumer debt. 3. Look to move into a job with a retirement contribution or something if at all possible in the next few years. My husband's 401(k) has really added up over the years and 1/2 of the contributions have come from his employers. Quote Link to comment Share on other sites More sharing options...
Carrie12345 Posted March 12, 2014 Share Posted March 12, 2014 I agree about the Roth. For me, the biggest impact was seeing the charts in the Dave Ramsey high school program. Sadly, I didn't see it until I was 34, lol. But I highly recommend looking up some charts/graphs that show the difference between saving small amounts early and saving large amounts later. It's astonishing, and words just don't convey it (for me, at least) as well as images. Quote Link to comment Share on other sites More sharing options...
Night Elf Posted March 12, 2014 Author Share Posted March 12, 2014 We'll look into the Roth IRA. It's so hard for people her age to think so far ahead, but as retirement for DH is only 10 years away, I can see it differently. She loves saving though, so I think this would be good for her. Thanks ladies. Quote Link to comment Share on other sites More sharing options...
JustEm Posted March 12, 2014 Share Posted March 12, 2014 We'll look into the Roth IRA. It's so hard for people her age to think so far ahead, but as retirement for DH is only 10 years away, I can see it differently. She loves saving though, so I think this would be good for her. Thanks ladies. I'm 27 and thinking about retirement is still hard to think about let alone give up money now in order to have later. What helped me save when I was younger was the idea that starting now would make it easier to scale back when I started my family and needed the extra funds. That's exactly what I did. Saved for the first 4 years of working then when my first child was born I became a sahm and we had to stop saving for retirement in order to live off one income. Five years later and we are financially able to contribute to our Roth again. Just put 3000 in last week. The plan is to max dh's out this year and the hope is to max both out if possible. Quote Link to comment Share on other sites More sharing options...
LucyStoner Posted March 12, 2014 Share Posted March 12, 2014 I'm 27 and thinking about retirement is still hard to think about let alone give up money now in order to have later. What helped me save when I was younger was the idea that starting now would make it easier to scale back when I started my family and needed the extra funds. That's exactly what I did. Saved for the first 4 years of working then when my first child was born I became a sahm and we had to stop saving for retirement in order to live off one income. Five years later and we are financially able to contribute to our Roth again. Just put 3000 in last week. The plan is to max dh's out this year and the hope is to max both out if possible. Since I started staying home (at age 31 after 8 years of being a WOH mom) we have made my Roth the priority over his. His employer contributes to his 401(k) equivalent and then we add to my Roth and then we will think about his. SAHMs lose employer contributions and SS credits. So we both felt that first priority on one income after getting the full match from his work was to get some retirement contribution made in my name. Quote Link to comment Share on other sites More sharing options...
MBM Posted March 12, 2014 Share Posted March 12, 2014 What's the best advice I can give to my 21 year old about saving for retirement? Her current job has no benefits so this would be all on her own. She has a regular savings account. Is there something better she can choose, something that she wouldn't have to contribute too much money per month? Learn about compounding interest. Whatever she puts away now at her young age has the potential to be worth a lot later on. This is one of the first things we taught our kids. Budget. For awhile, keep track of the money -- every penny. The one penny she puts away at age 21 can be worth many pennies when she's 50. I used to write down everything I bought on a folded sheet of paper. To keep it from getting too tedious, eventually I allotted a single amount weekly for small purchases. Doing this makes spending crystal clear. Put money away habitually. Don't fritter it away. Get odd jobs if necessary to do this. Investing early is smart. Make a commitment to learn about the different ways to invest. Check out library books, read online resources. Learn about the options. It's not so terribly difficult. Use credit wisely and responsibly. Shop around and read all of the fine print. Understand the interest rate and penalties. Make a folder for each credit card and place all pertinent paperwork in there. Keep receipts for each credit card in separate envelopes and pay off in full when due after verifying charges on the statement. If she cannot manage to pay off in full, consider not having charge cards just yet. The interest and penalties can be high. Quote Link to comment Share on other sites More sharing options...
JustEm Posted March 12, 2014 Share Posted March 12, 2014 Since I started staying home (at age 31 after 8 years of being a WOH mom) we have made my Roth the priority over his. His employer contributes to his 401(k) equivalent and then we add to my Roth and then we will think about his. SAHMs lose employer contributions and SS credits. So we both felt that first priority on one income after getting the full match from his work was to get some retirement contribution made in my name. DH doesn't have any retirement benefits from work so we have to contribute to our retirement by ourselves entirely so for us it doesn't really matter which roth is contributed to. Now if he takes a job offer that has been given to him recently he will have 401k and employer matching so my roth would then be the focus. Quote Link to comment Share on other sites More sharing options...
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