Are you saving up for retirement?
|The S&P index over the last 10 years, have you been participating?|
“I’ll worry about retirement when I… get older, pay off my student loans, make more money, get married, have kids, etc etc etc.”
It drives me nuts hearing how so many people are not planning for their future. Recent surveys find that one third of all Americans have less than $1,000 saved for retirement. All around me, people are just living for today, and not thinking about tomorrow. Let’s face it: life is long, and you need to plan for it.
When do you want to retire? Do you want to work until the day you die? If not, it’s time to think about your own retirement.
My advice: just get started. Go to Vanguard.com and open a Roth IRA. Start investing with a simple Target Date fund. Then contribute to your Roth IRA on a regular basis. You can read more about my investment philosophy in my series of posts starting here.
When I first opened my Roth IRA account on December 1st, 2011, I funded it with $5,000 and put it all into a Target Date fund. My wife opened her first Roth IRA at Vanguard shortly after I did. Since we started to take retirement more seriously, we’ve consistently invested in our Roth IRAs, 401Ks, and taxable account. In our short investing career, the stock market has been consistently doing well. In fact, today, the stock market hit another all time high.
While I don’t expect the market to continue to perform this well (the market has already been up over 170% since the start of this bull market in 2009), we are investing for the long run and do not intend to touch our retirement funds for over 10 years. We look at any drops in the stock market as buying opportunities.
If you’re a reader of this site, hopefully you’ve started investing already. This is a friendly reminder: If you have not maxed out your IRA for 2013, you actually have a little less than 2 weeks to get it done! While we are in the year 2014, you still have until Tuesday, April 15th, 2014, 11:59pm Eastern time to invest in your IRA for 2013.
For those following our slow and relentless progress towards financial freedom, here is our most recent investment update:
|We're getting close to reaching our first $100,000! We still have a ways to go before retirement.|
Essentially we are investing in a simple Boglehead 3 fund portfolio. Our current asset allocation is made up of 90% stocks (70% domestic stocks, 30% international stocks) and 10% bonds. Our 401K funds are set up to mimic Vanguard’s Total Stock Market index fund. This portfolio is easy to manage and we sleep well at night not worrying about the volatility of any individual stock.
With our 3 fund portfolio, we essentially own a piece of over 3,600 US stocks (like Apple, JP Morgan Chase, Google, and Chevron), over 5,500 International stocks (like Nestle, Toyota, HSBC, and Samsung), and over 6,300 individual US Bonds. We’re also saving a healthy portion of all our income with the intention of buying our first rental property in the future. I’d say we’re well diversified.
Start investing early, consistently, and for the long term. Your future self will thank you.