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Sunday, November 3, 2013

When and How to Save for Retirement Addendum

Here is a good, basic article by Anisha Sekar for newbies that sorts out some of the confusion on when and how to save for retirement: When, and How, to Start Saving for Retirement .

My summary and take: 

#1 basic point:  first pay off high interest debt and set up emergency fund.

#2 basic point:  use company 401(k) up to the point of the company match.  IF YOU DON'T KNOW IF YOUR COMPANY HAS A MATCH, FIND OUT ON MONDAY MORNING BY ASKING YOUR BENEFITS PERSON.

#3 basic point:  if you can save more, then learn how to invest in low-cost, well-diversified funds and open up an IRA.  TO DO THIS, OPEN AN ACCOUNT WITH A DISCOUNT BROKER AND BUY THE ETFS ON LINE.  TARGET A PRE-SET ASSET ALLOCATION.

#4 basic point:  save as well in a taxable account.  The thing is that we don't know what the future brings.  Even though we may have the standard emergency fund established, our wants change over time.  Four years from now, you may want to buy a house, change professions, or start a small business. Too often these events lead people to tap their retirement funds.

The bottom line is that one day you will be 65 years old and, at that point, have choices available to you that depend on your saving habits today.  Putting this off until next month or next year may very well take away these choices.  By all means, don't let the confusion surrounding these different investment vehicles result in inaction and, thereby, steal your retirement!


  1. Good points Robert! There was a time in my life where I was over-thinking and pondering if I should invest in a Traditional or Roth IRA... then decided, why not both? No one knows what my tax rate will be when I retire!

  2. Over thinking in many ways holds many investors from getting into the market. They go down the "what if" road and reasons for not investing pile up. As the market rises the reasons for not getting in fall to the wayside and they get in near the top.

  3. Hi Robert, good advice. The emergency fund will be very essential. What would you recommend for that? Six months of living expenses?

  4. I think the emergency fund depends on the situation. If your job is stable, living accommodations fairly new and transportation in reasonable shape you can get away with 3 month's living expenses. If, on the other hand, if you've got elderly relatives living cross country, have friends who may invite you to participate in a wedding, or are driving a piece of junk then you may want to bolster the fund.
    The bottom line is you want to avoid tapping the 401(k) or IRA etc.