I'm going to start my first REAL job soon, and I need to start planning for retirement, but first I have some questions. Is the hype about the govt not having enough $ to pay for my generation of retirees for real? (I'm 22).
Or should I start an IRA instead? Or both?

 

Unless you plan to live on just your Social Security (2002 average was $895 per month) you need to start your own retirement plan/fund.

I'm doing Both (401K and a Roth IRA).

Scrib should pipe in on this... He's my idol when it comes to (retirement) investments

I really wish I would have started my retirement fund earlier in life.

Here's a 401K calulator http://money.howstuffworks.com/401kcalc.htm

"It is particularly interesting to note the massive difference between the 30 and 40 year numbers. Getting started at age 25 rather than 35 can have a BIG impact! "

 

i'm already phased out as far as IRA contributions due to combined annual salary between my wife and i...so it's all about the 401(k). and, yes plan for that retirement...my parents didn't, so they're still working.

 

Probably. I damn sure would not count on there to be anything there from the gov't when the time comes for you to retire. Do both a 401k and an IRA, and start a seperate investment program. At your age I'd try to put aside 15% of your gross pay.

Read the book "The Millionare Next Door". I wish I'd had it several years ago.

 

Put away as much as possible, with a min of 15% of your pre-tax income going towards retirement savings. Don't forget to keep 5k sitting around waiting for something unexpected to arrise. If you have any current debts such as credit cards, pay them off first and then put away as much as you can. Don't be afraid to live poor and shop at target, it will help when you get older.

 

Have lots of kids so that they can easily afford to support you once you're old.

 

^^
kids are hardly an "investment" today. average cost to raise a kid until they are 18...$250K. you want an extra mil? don't have 4 kids.

 

Roth IRA, get one, fill it every year to the max or as close as possible.

 

GM ---->

Put in as much into your 401K as possible. Especially if your employer matches...

Next... Start a Roth IRA. max it out.

Then... Start some investments on the side. Diversify into stocks, tax free municipal bonds (for stability) and of course mutual funds. Try to build up a safety fund so that if you lose your job, you have saved the equivalent of your salary for 6 months.

Find a GOOD investment broker... Starting all this yourself can be overwhelming, especially when determining what to invest into.


Start with the 401K and work your way down the list. Starting young and investing as much as you can is the BEST way. My wife and I are not counting on social security one bit. Nor should anyone our age. The baby boomers will suck it all up.


Good luck.

 

Lots of good info in this thread...

After years of hearing about it, I finally bought a copy. I'm about 1/2 way thru it...

I have a retirement planner that manages my roth ira and mutual fund investments, but I'm not sure if he's a GOOD one...

I have to start working on a planning/budget spreadsheet... I have to start watching what I spend on food, housing, etc... It seems that my savings isn't increasing by much each month, but I don't know exactly where the money is going (tractor and lawn equipment probably )...

If I did as much reseach into retirement planning as I do into used sportscar pricing (surfing porsche forums) I think I'd be much better off

 

Some good advice here. Thanks everyone.

 

Many years ago a very smart (and wealthy) man told me "Pay yourself just as you do any other bill.".

There are two kinds of expenses each month; "gotta pay" like rent, electricity, etc and "optional" expenses like movies and beer. Most people pay the "gottas", spend most of the rest on the "optional" and save any that's left over. He puts savings/investments in the gotta pay group; you pay yourself like you do the rent, and spend the leftover on beer, babes and toys.

If there is nothing leftover, you can come here and whine but you do not skip a payment to yourself.

 

^^
sounds like something from a richard kiyosaki book. i agree with the "pay yourself" mentality also. contributing to a 401(k) is exactly that, since your money is nice and safe even before you get your paycheck.

 

I find stuffing hundred dollar bills inside my mattress to be the safest investment strategy.

 

my safest investments are penny stocks lol, but i will start saving for real soon.

 

I do that after my 401K and Roth IRA are both payed for

Seriously, I've got the 401K, IRA and rainy day fund (if I lose my job, I can live off that), covered, but I need to get into some longterm stock purchases...

I'm looking for the next Walmart Maybe some thing like Target or UPS or some other realitively riskfree stocks...

 

I like no load mutual funds, there are several good ones for long term growth. Hit the website for Janus, T. Rowe Price, Vanguard and American funds for starters.

 

ETFs my GreenMonsterFriend...ETFs.

 

tell me about ETFs

 

Exchange Traded Funds...Google It

In a nutshell...

They often imitate or are managed to follow the performance of major index mutual funs, but are traded like a stock. They are a basket of securities openly traded on the exchange. Some of the more popular ones are QQQQ (Nasdaq 100), SPY (follows the S&P index), DIA (Dow Jones IA), etc.

Advantages/Disadvantages vs. Mutual Funds:
Since they are openly traded on the exchange, they can be bought/sold anytime the market is open, unlike mutual funds which are generally purchased after the market has closed. Low annual expenses and higher tax efficiency compared to mutual funds. Disadvantages - Commisions on each trade, slippage (it is a stock).

If you plan on investing in ETFs, make sure you do so in large quantities per transaction, otherwise the commission you pay on each trade will eat away at the gains you may make. Smaller investors will likely benefit from doing some type of automatic investment plan with mutual funds.

 

One thing that helps is if you automaticly reinvest dividends there is no comission on that trade.

With a noload fund there is no comission but expenses are deducted from the dividend so you can sell shortly after purchase without taking a hit. With an ETF or other stock the comission is paid up front.

 

I can't be the only one who is using a whole life insurance policy as a device to save long term am I? At the young of an age(I am 23 btw) a ROTH is a MUST do, and if you have any left over money you can not lose with a whole life insurance policy. I started investing heavily when I was 18 and it was with out a doubt the BEST move I've ever made. Even though the market has been horrible I have been buying things "on sale" for a long time now and when it bounces back, I will be smiling.

I recommend life insurance because it offers things other forms of investment do not. Like a ROTH its payed with post tax income but never taxed again- if you can afford to pay the taxes now, do it! My life insurance has been averaging 8% a year since I started, I only wish the same was true with my ROTH. Not to mention you have a very comprehenisive insurance policy, which is a good thing to have from a young age. Life insurance is also more flexible you don't have to wait till your 65 to draw on it, if you want to buy a new helicopter when your 40 and you've played your cards right- cash in one of your policies and buy it with NO penalties.

Look and see if there is a North Western Mutual office in your area and contact them. The financial advisor I use over at my local office is great, ChFC, CLU and CFP and no fees! He's a great guy to boot and has become a good friend over the years, and last year he asked me to sit on his board- the whole experience has been very rewarding.

 

both my wife and i have whole life universal policies...if i had to do it over again, i would have just gone term. the difference in premium (assuming the save coverage amount) can be then invested in other areas. there's been numerous studies how the average investor can get much better returns doing the term/self investing route vs a whole life policy. IF you don't have the discipling to apply the premium difference, than a whole life could be a viable option since that money is gone for spoken for (unless you cancel).

our main concern with the policy is protection against our death for the kids, and we figure that had we gone with a 30 year term, our children would be sufficiently grown and old enough to care of themselves by then. plus, our house(s) would have been long paid off.

 

Great points...

Whole life is nice, but again premium differences can be used to in other areas...

I like having control of my money... And my research showed that I could get much better returns on the money I invest for my wife and I versus shelling out quite a bit more for a whole life policy.


Not to say whole life is bad... I just think there are better options...

 

It is worth noting that not all whole life is the same. MOST companies offer poor flexibilty and low returns. Of course the premiums are significantly higher(I currently am paying around $1200/month for all of my policies) but I also made 8.5% annually on my cash surrender value the last 5 years- I only WISH my other investments were as consistant. What fund(s) could you have invested that offered those returns during the late 90's through early 2000's? Nothing with out taking GREAT risk.

It is also worth saying that there is no perfect solution for everyone person, I am a small business owner so I needed significant life insurance to insure my business' future. If I were doing it to provide a family(pressuming I was married with children, which I am not yet) I am not sure I would opt for whole life, it can get expensive if your not using it as a device to save. Then again you pay a lot more now but you get it all back with tax free interest later, I don't recommend using it for its insurance; I have plans of cashing in all of my policies while I am still alive- but in the mean time I have life insurance, in essence, for free.

I am sure part of my problem is that I don't like paying taxes, so any way I can avoid taxes(legally of course) I will take that route. Which is the reason I like ROTH's as well, in particular when a person is young- the problem is when you start making money(90k/ year when single, 150k/ year if married) you are no longer aloud to contribute. The other problem with ROTH's is the amount your can contribute, this year is only $3k, next year its $4k and two years later its increased to $5k.

Of course this is all just my .02 I doubt many successful people take the same road, there are plenty of options no matter what your situation and needs are.

 

dang...$1200/mo for you policies? what is your total coverage, and can you name some of us A-CL folk as beneficiaries? surely you can spare some $$$ since you're not married w/children.

 

Believe it or not the beneficiary on my big policy for the next 10 years(from the time it was started) or so is my business how sad is that- but if I don't die, I will have a lot of money at my disposal and will be young enough to enjoy it. One of the other corporate officers has a similar sized policy and the CEO has one that is about the size of both of our VP policies put together. I guess our insurance guy likes us for a reason

As for the total coverage I don't recall the actual value, I know its really high for whole life and it goes up as I age. I nailed all of this down 4 or so years ago so its not fresh in my memory.

As a side note, woman LOVE hearing about this sort of thing- it really makes them feel more comfortable around you. Not that they are gold diggers, just they seem to like being around a guy who "has his shit together". When you tell a girl you have the college and private school fund started for the kid(s) you don't have yet, they get weak in the knees. At the same time don't tell that information to the wrong kind of girl, or that college fund may be getting used on lawyer so she doesn't take it all!