Kickstart Your Retirement Investing with These Three Steps
BY DEREK BRAINARD, AFC ® , CRPC ®
There’s no need to overthink investing for retirement. In fact, the more complicated we make investing, the less fruitful is often is.
For most people, kicking off their retirement investing is as easy as 1-2-3: set up automatic contributions from your paycheck to a retirement account, choose the mutual funds, index funds, or target-date fund inside the account that best fits your style, and then, as you’re able, increase your contributions over time and not your lifestyle expenses.
Let’s break down these steps to kickstart your retirement savings.
SET UP AUTOMATIC CONTRIBUTION TO (AT LEAST) MAX THE MATCH 401(k)s and 403(b)s are retirement investing accounts available to you through your employer. If you don’t have an account available through work, you can open an individual retirement account (IRA) online. Inside these accounts you can invest in mutual funds, index funds, or target-date funds to grow your money for retirement. Set up automatic contributions from your paychecks or increase or decrease your contributions with HR when you start your job, or online at any time. The benefit of these plans is that your money can grow tax-deferred until you need it later in life, as laid out by the tax codes each plan is named after. Employer-sponsored accounts like 401(k)s are the most common vehicle used for retirement investing, and they often come with an extra perk. Employers can choose to match your contributions into the account up to a certain percentage of your income each year. For example, the plan may allow for matching up to five percent, so if you contribute five percent of your paycheck, your employer also kicks in five percent! This is essentially an immediate raise that’s available to you, but only if you contribute the amount it takes to “unlock” the match. Don’t leave it on the table.
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