Retirement: How do I save??

[kimandkathess]

I was wondering how one saves to retire and actually saves enough.
Im not really sure how social security works and how they estimate how much you get for how many months....so im not even going to worry about that at the moment but.....

I am 26, Soon to be 27.

I estimated the following:

I would retire at: Age 70

I would die at :Age 100 (Just a guess lol)

Years to save: 43 (or 2,236 weeks)

Amount needed to live on each month: $2,500

That comes out to $900,000 to live on for 30 years.

In order to make that mark with a savings account of no interest I would need to put away $1,612 a month!

What do i do??

[~~Who,Me?~~]

There are several good sources online about investing. I like Suze Orman and Vanguard (that is who most of our investments are with). If your employer has a matching program, do it and max out--that's free money. Suze has mixed thoughts on pre-tax vs post tax saving--pre tax, yeah, you save money now by being taxed less. But we can only assume as life marches on that our tax rates will increase, so would you rather be taxed now on the money, or in 40-50 years. Otoh, if your employer has a 50-100% matching program, there's no way the tax rate will go that high. (unless you ask den or meems, but that's a whole 'nother debate for a whole 'nother board, so I won't go there)

Kudos to you for starting your saving young, that is about when we started, and now we're closing in on 40. And we are miles and miles ahead of most of our peers in this area, and they're scared. We're not. Because like you, we had the discipline to do it while young.

For now, I would strive to save the 10% that most "experts" recommend. As your income grows, remember to have your savings grow as well. Good luck!

[kimandkathess]

So I should put away 10% of my income? Is that what your saying.

Also. My employer can't match...I work for myself. I run a Family Daycare Business out of my home.

So I was kind of wondering what exactly CD's or IRA's were. Something that would give me interest. I will look into Suzie Orman.

[kimandkathess]

Ok, now my new question is, what do you think is a good interest rate?
I am using a calculator at suzie ormans website.
It says if i have an initional investment of $100, with a $150 monthly addition at a 10% interest rate I could get to 1.3 million in 43 years.

Now i just need to know what I can do to get something with a 10% interest rate, because I want to start something on my 27th birthday and that is 3 months away.

[rebate_queen]

I would look into some mutual funds...I have some with T. Rowe Price, Fidelity, and Bridgeway. Vanguard is also pretty good I've heard, as PP said. You can invest in different ones based on how aggressive you want to be. Some are higher risk, some are lower risk...I think the one I have with T Rowe Price is supposed to average about 10% but it has just now started going back up after being down for a few years. That's the risk you take, but if you have as much time as you do till retirement, it will have plenty of time to grow. I'm definitely not an expert, but I hope that helps a little.

[susysnshn]

You aren't necessarily "looking" for 10% interest. Nothing is guaranteed to pay that now. At your age, you want to invest automatically in the stock market through something like Vanguard's target funds (the target is your retirement date but go maybe 10 years later). Then you need to shut your eyes while the market goes up and down over your working years. That's hard, but the target fund will adjust for you.

I didn't start until I was in my 40s. I never thought about retirement since my husband would get a pension. Guess who isn't married to him now? I have since remarried, but my new DH has a 401k instead. Fortunately, I am planning for my own retirement.

[kimandkathess]

I have no idea about stocks or mutual funds. I wouldnt even know where to start. That kind of stuff has always scared me. I learned about it in highschool my senior year and thats it. I wouldnt know what to do.....
I guess I am trying to go the safe route and find something that wont take my money if there are downs..... I want to be reasured that the money i put away is there to stay and that the interest I earn is guarenteed.

[kimandkathess]

Sorry another question here.

What exactly is a CD?

What exactly is an Ira?

Is it good to have them both? or is one better than the other? I have heard of them but never really knew much about them. And do you need to have a high initial investment for either one?

[terrortoys]

I recommend calling you local bank branch.. ask to speak with their financial advisor... they can answer all your questions, and advise you free of charge..

[Colinsgrandma]

Starting is the hardest part.