Setting Up Your Retirement Account
Lesson 16 from: FAST CLASS: How to Plan Your Financial FutureErin Lowry/Broke Millennial
Setting Up Your Retirement Account
Lesson 16 from: FAST CLASS: How to Plan Your Financial FutureErin Lowry/Broke Millennial
Lesson Info
16. Setting Up Your Retirement Account
Lessons
Class Introduction
02:04 2The Getting Financially Naked Playbook
10:05 3Financial Red Flags
02:51 4When and Where to Turn for Help
01:53 5Talking Money with Your Friends
04:58 6Stand Up for Your Financial Self
02:03 7Picking Financial Products and a Planner
03:57 8Ditching Bank Fees
03:52What You Should Expect from Your Bank Accounts
04:42 10Everything You Need to Know About Credit Cards
11:45 11Am I Ready to Hire a Financial Planner?
10:48 12Planning for Retirement
08:23 13Retirement Accounts
07:27 14Basic Investing Concepts
05:06 15Self Employed Retirement Planning
02:59 16Setting Up Your Retirement Account
04:07 17What Happens to 401(K) When You Leave Your Job
02:58 18Motivating Yourself to Save
03:47Lesson Info
Setting Up Your Retirement Account
So how do you pick, figure out what feels best for you in the moment? If you do have access to an employer offering and you get a match, I recommend going with that. If you can only put away about 5500 bucks, a simple plain vanilla ira Roth or traditional is a great way to go. If you want to put more supper solo, if you're self employed. Another little hack also is if you are traditionally employed and also have a side hustle, You might also be eligible to open up a step or a solo 401K if you want to triple down if that's your jam but definitely speak to an accountant about it. But it is a possibility. But in the beginning the goal is pretty simple. If you are traditionally employed, save enough to at least get the match, you can put more than the match in. That's actually something that I misunderstood. When I started saving for retirement, I thought you could only put in the 4% to 5% whatever it was to get the match, I didn't realize I could put 10% away if I wanted. My employer was ...
just only going to give me a contribution up to 4%. So when you're starting out, even if you have debt, I highly encourage you to try to get the employer match because again, this idea of free money. Now, if you're self employed, my recommendation is to set a goal for yourself. How much money in a year do you want to be putting into retirement, divided by 12. Put that amount of money aside every month. Another easy option is putting 40% of your paycheck each time you get paid aside, the remainder goes right into retirement. But in terms of actionable goal setting, this is a much better strategy. Now, what type of investments do you want? This is when it gets tricky but hold up, how do I even pick the investments in the first place. Now, a lot of this comes down to research and the idea of building your portfolio in line with your asset allocation. What percentage is going to equities? Which percentage is going to bonds? Are you putting some, if any in cash. Now, a really easy way to get started is with something called a target date or all in one fund. Totally depends on your actual investment brokerage that you're using some of the time they call it a target date fund. Some of the time you hear it referred to as an All in one fund, It is a very simple concept where basically they are investing for you in a year that is correlated to around the time you would retire. So let me break that down. If you think you're going to retire around 2055, you pick a target date fund that says target date, 2055. So in the beginning it's going to automatically invest you in a more aggressive portfolio and then automatically get more moderate to more conservative as you near your retirement year. Target date funds sometimes get some backlash in the financial community and there are a couple of reasons why one they tend to have some higher fees. This comes back to the idea of every dollar that goes towards the fee is one less dollar that's compounding for future. You. Another reason is it's a very generic thing. It's not actually customized specifically to you and your personal financial situation, which means that it could put you in a more conservative portfolio a decade before you actually need that more conservative portfolio and therefore it's not compounding in the way you want it to now. What if you have access to buying company stock? This can be a really great perk for a lot of people and sure go ahead and put some of your money in company stock. Put some of your retirement and company's stock if you want but not all of it and not too much of it. Coming back to that idea of diversification and asset allocation because one thing that can be very nerve wracking about this is if something happens to your company, your salary is already tied to it. You don't want your whole retirement account tied to it as well because you don't want to lose your job in your salary at the same time that your retirement account takes a nosedive because you're over indexed into company stock. So just make sure you have some balance there. Sure go ahead and buy into the company's stock, but don't put all of your eggs in that one basket be diversified. And what are the costs of these different funds? So just kind of running down, remembering the idea of expense ratios and administration fees. How much are these funds costing you again? Coming back to the thought that every extra dollar and fee is one less dollar you have in the future, it's okay to pay some fees, but you just want to make sure that you're not paying too much in fees.
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