Every year on my birthday, I make a list of new things I want to try. Some of them are exciting, some are difficult, some are shockingly mundane. You can read about past adventures here. Also, this post is NOT sponsored by Fidelity Investments in any way. I just had a really good experience with them.
Like a lot of people, I'm intimidated by things like Investing and Money Market Accounts and Having A Diversified Stock Portfolio. My money management technique goes something like this: spend less money than I earn, don't buy things I don't need. And this has served me very well!
It also means that apparently I have the same money management strategy as Liz Lemon.
Because I've spent most of my adult life either:
a) in other countries
b) working at well-intentioned, but underfunded non-profits with no benefits package to speak of
I have virtually no retirement savings. Like, I have enough to pay a several months' worth of rent. Which is a bit worrying.
So this year, I set about making things right. Or at least very, very slowly start putting away money for my retirement.
If you don't know, here's the deal with retirement funds:
A retirement fund that's part of your benefits package at your job. Both you and (hopefully) your employer contribute to this fund - they're not legally required to contribute but most do. If you don't contribute anything, neither will your employer. Since I'm self-employed, this obviously wasn't an option for me.
An individual retirement fund; not tied to any employer. You can put up $5,000 into your Roth IRA each year, either in one giant chunk or in small payments throughout the year. You don't pay taxes on the money in your account when you eventually take it out and use it. Contributions to your Roth IRA are not tax deductible.
Is similar to a Roth IRA but your contributions can (usually) be deducted from your taxes. But with traditional IRAs you do pay taxes on that money when you withdraw it.
I chose to open a Roth IRA. If you're feeling clever and brave, you can do the same (all by yourself!) at Fidelity.com but I wanted to talk to A Real Live Human and have things explained to me using pie metaphors and hand gestures. I wanted to write a real check, with a pen, and hand it to someone.
So I did! My super lovely Financial Adviser Katie, asked me all sorts of questions about how aggressively I wanted to invest (not particularly), how many working years I had left (about 30) and how involved I wanted to be in my portfolio (uh, not.)
"I want to write a check once a year and not think about it again," I said.
So she hooked me up with a Target Date Fund which is a fund that considers an investor's age and earning years. When you're young, it'll put a higher percentage of your money into of (relatively) risky stocks and as you get closer to retirement it will automatically put more of your money into safer bonds. You don't have to switch anything around or constantly worry about it! Awesome.
I'm still not an investment guru by any stretch of the imagination, but it feels good not to be entirely clueless. While I was writing this post, I asked my uncle (who worked in business and finance for ages) to give it a once over. He had this sage advice:
"It all gets very complicated, but in the end the most important thing (especially if you are under 35) is to save for retirement, and save lots because the old folks are going to spend all of the Social Security money. There are lots of places to get good advice or bad advice on saving on the internet; just use common sense as you would planning a trip or deciding for whom to vote."
Do you have investments? How are you planning for retirement? And exactly how overwhelmed are you by talk of portfolios and percentages?