Beginners Guide to Investing for Retirement | Home Finance Help

This beginners guide to investing for retirement will show you how to save for retirement automatically by paying yourself first.

It?s easy to fall into a trap of waiting for a pay increase to start saving for retirement. If that is your mindset, you?re likely never to start.

What if you started saving 10% of your income, from your first job as a teenager? Investing for retirement would be easy because the habit of paying yourself first is already there.

The end result should be to save 10-15% of your income for retirement without even thinking about it. That doesn?t mean you need to get to 15% by next month. Try saving 1% next month, and increasing by 1% each month until your at your goal.

It?s time to find a place for that savings, even if it?s just 1%. The government has set aside a few accounts that are specifically for retirement savings. You?re giving up more then you think if you don?t take advantage of these accounts.

Beginners Guide to Investing for Retirement ? Investing with Your Employer

Your first step in retirement investing is to invest in your employer?s 401K, or other employer sponsored plans up the company match. There is no other investment that gives you an automatic return like a company match. Don?t give away this opportunity.

For example, an employer might match 50% of contributions up to 5% of total pay. If you wanted to take full advantage of the company match, you would have to contribute 10%. By contributing 10%, you?re eligible to receive the full 5% of matching contributions.

Even if your employer doesn?t match, there are still many advantages to investing in an employer sponsored plan.

For more on 401K?s, visit the 401K Guide.

Beginners Guide to Investing for Retirement ? Individual Retirement Accounts

After you start the habit of saving in an employer sponsored plan or if you?re not offered a 401K, you can move to an individual retirement account, also known as an IRA?s. Starting an IRA takes a little more willpower, because it must be done on your own.

You will have the option of choosing between a Traditional and Roth IRA. Typically, for younger investors, a Roth IRA will have a greater tax savings.

By using your bank correctly, the habit of investing in an IRA is very easy to start. After your paycheck is directly deposited into your bank account, have an automatic contribution going towards your IRA.

For more on IRA?s, visit the IRA Guide.

Beginners Guide to Investing for Retirement ? What?s Next?

The reason to invest is to give you more flexibility down the road. This is where it?s important to develop your financial goals at the beginning of any financial plan.

The next step is up to you. A typical young adults goals can range anywhere from saving for an early retirement, kids, vacation, mini-retirement, weddings, houses, cars?etc.

Even though there is no specific account to set aside these goals, make them a priority. Make withdrawals the day after your direct deposit hits into specific savings or investment accounts set aside for each goal. Learn to live on the rest.

Starting the habit of saving 10-15% of your income for retirement, will allow all these goals to come true.

Source: http://www.thehumblemumble.com/beginners-guide-to-investing-for-retirement/

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