2 answers

How to plan for retirement?

Updated West Nyack, New York

Seeing as how my income will be very minimal while in college (around 200$ a month) how can I begin saving for my retirement? -- Also interested in investing
#plans #goals #retirement #investing #financial-planning #finance

2 answers

Jeff’s Answer

Updated Cocoa, Florida

Hi Joshua,

It is vitally important you invest as young as possible.  A company offers a vehicle called a 401k in which they match a % of your contributions (for example, 100% of 6% is typical) which is FREE MONEY.  If you haven't started working for a company yet, look into a RothIRA.  Money can be taken out in retirement TAX FREE!  This is such a great investment vehicle that the government (whose tax laws created it) only permit you to invest $5500 per year, and you can't go back in time and invest (the year you start you can invest $5500 and another $5500 the following year, but you can't go back and invest $5500 for age 21, 20, 19, etc.)  You can set one up at a financial institution like Fidelity, Charles Schwab, or Vanguard.  Don't do riskier investments like investing in a single stock, invest in the stock market as a whole cheaply such as with an ETF (Exchange Traded Fund) that tracks the market (QQQ is one that tracks tech companies, IVV tracks large US companies, VTSAX tracks the whole market- these are all good examples of what to put your money into inside the vehicles listed above). 

I would suggest getting a part time job while in college, and set one of these up.  In general terms, the market doubles on average every 7 years, meaning whatever you have invested will be twice as much in that time.  A 21 year old who invests in a Roth IRA will have a half million in 30 years.  A 401k will yield even more since you get the free money and can invest more.  Here is more info (https://www.nerdwallet.com/investing/roth-ira-calculator).

Paul’s Answer

Updated New York, New York

It's never too early to start thinking about retirement! I would suggest you do some research to find a financial institution that will accept as little as $50 per month to invest for your retirement. Note that you may be required to set-up an automatic draft from a checking account. As far as the type of investment vehicle, many financial advisors suggest Roth IRAs as a great tool to save over the long-term. You will not get a tax deduction on your contributions but as long as you keep the assets in the account for at least 5-yrs the money will grow tax deferred and you are not subject to taxes upon withdrawal.

Please consult a tax advisor before you make any investment decisions.