27 Years old. Am I too late to invest?

Question

I have aboy $3,000 in the Thrift Savings Plan (a government type IRA), and that's about it. I have bought and sold some stocks, been pretty good at it so far, but i need security. I akm about $6,000 in total debt, do not own a home and have a good ratio on my earning to spending. My checking account has about $2,000.00 that I don't need to pay bills. I am in the navy and I reitre in 13 years, and I want to be able to retire at that time. I will have the military pension, but we all know that's not enough. I just opened an ING bank account last week to start putting some cash there (4.5%), but I need something good, and that will be ready for me in 13 years. Any help is appreciated.

Answer 1

No, you are not too old. The TSP is more like a 401k. If you want to retire in 13 years, you have a lot of work to do... I mean a LOT. What GS are you? Are you making enought money to save? With the TSP, you should be contributing atleast 3%, because they will match with 100%, then 50% above 3%. You might want to look into talking with a financial advisor. If you dont' want to pay fees to an advisor, you should start learning about different types of investments (if you don't know already). Try www.investopedia.com to learn and www.sharebuilder.com to actually invest. I recommend ETFs and Index funds. Over the long term, they will always have gains. 4.5% is a good rate for a savings account but watch out for "catches" also, it may just be an introductory rate.

Ideally, if you retire at 40 and live another 40 years, can obtain a 7% rate of return, and need $40,000 a year for the 40 years in retirement, you need to have a little more than $500,000 in savings by the time you are 40 years old.

You can reach this $500,000 if you save about $27,000 a year for the next 13 years, given a 7% rate of return.

Depending on your salary, this may be obtainable but you have a lot of work to do since you have basically no savings. Also, I used 7% because thats the average rate of return in the stock market but depending on your investments, it may be more or less. I would take full advantage of your TSP because all that matching the gov't does will really pay off. Also, it may be tough, but buy very few "wants" and try to stick to spending money on "needs." People usually think it is impossible, but it really isn't. Also, I'm sure you'll want a home at some point and you have to take that into consideration as well. Good luck.

Answer 2

Not by a long stretch. I would recommend you invest in a good book that covers financial planning. There's a lot more to financial security than just investing, and buying and selling stocks unless you have more than $100K to invest AND a firm and disciplined investing strategy is not investing, it is gambling.

Financial security involves a lot of things including - getting rid of your debt - debt is one of the worst things you can have except perhaps a mortgage. Since you don't have a family or home, you can delay life insurance, but at some point you will need it and a FP book will help you figure out when.

Next steps - Set up a ROTH IRA for yourself with a good, no-load mutual fund like something from T Rowe Price, Vanguard or Selected American. Use payroll deductions to invest every month and really try to put away the $3K a year you can. Once you establish that discipline, you will likely keep it up, but starting early is best because time will compound the growth of your investments. Time is your best friend.

Other than that, keep in mind that HIGH risk usually doesn't mean better returns. This is too short a space to explain why but as you learn you'll get it. Invest in something moderately risky at this point like a good balanced fund (meaning a combination of different kinds of stocks).

Bonds are not a good choice for someone saving for the long term.

When you begin to accumulate more money or your life gets more complicated, seek out a good financial advisor. At this point, if you'll invest the time you won't need one, but once you start a family it will be a good time to ask for objective advice.

Best of luck

Answer 3

Nah, you've got lots of time. I mean, if you started sooner, you'd have been even better off, but you're still ahead of most people. Some don't start investing until their 50's.

I'd say, based upon where you are in life, you definitely need to be thinking about stocks. I'd suggest opening an account at www.scottrade.com or www.ameritrade.com or someone like that, and start out with something simple like a mutual fund.

Certainly, getting rid of the debt is a high priority, but it shouldn't prevent you from getting started in stocks too. Invest the $2000, and then make a commitment to paying off the debt month by month, while also committing to adding to your investment portfolio month by month. It's not enough to do one or the other. Clearly, you need both. It's senseless to have a big investment portfolio and still carry a big chunk of debt. On the other hand, its not really useful to have nothing invested, even if you're debt is paid off.

Once you've built up a little bit in your investment account, say $10,000 or $20,000 then it may be time to start moving away from the simple mutual funds and getting more into individual stocks. Until that time, however, you're probably better off with funds. At this point in history, I'm a big fan of international funds.

While you're saving money, you can also take advantage of your time by learning. Read a few books by Jeremy Siegel, Peter Lynch, and Benjamin Graham. They'll steer you in the right direction.

Best of luck to you.

Answer 4

The first thing I would do is get rid of the $6,000 dollars in debt. If the interest rate on the $6,000 is over 4.5%, you would be better off paying it down than stashing the money in a savings account. A Roth would be worth looking into also. You can't deduct it from your taxes, but you will never pay taxes on the appreciation. If you still have money left over after that, I would suggest mutual funds. They're not as glamorous as stocks, but generally speaking they are less risky.

By the way, it's not too late to start saving...

Answer 5

Just keep adding to the account little by little. You'll be 40 or 50
before you know it and your little Thrift Savings Plan will be a very
big savings plan. One of two hundred a month is all it takes.
Less, if you can't afford it some months, is OK. For bigger
stakes at the end of the game, try to get in on rental properties
in your home town. When you separate from the service, your
job will be to service your properties. You will need to deal with
tenant problems, but if you can deal with the navy, you can deal
with anything.
I Corinthians 13;8a, Love never fails!!!

Answer 6

What you need to do depends on how you want to live after retirement. in order to have a reasonably secure income of around $50,000/yr you'll need to have a cool million in the bank/retirement account. At the 4.5 % interest your ING account is making, you'll need to save about $59,000 a year.
If you can find an investment or fund averaging over 10%, you'll need to save about $40,000 each year.

If you have time for it, you could make some real estate investments, such as rental property, which could get you set up in just a few years with less capital. Lots of books on that sort of thing in the libraries.

Answer 7

Keep putting money into the Thrift Savings Plan, that's a good place for it. If you can max it out, open a Roth IRA. If your debt has a high interest rate, pay it off as quickly as possible.

Answer 8

first suggestion, don't make money what you're life is about.

that said, have you considered a ROTH IRA? they're excellent if you make less than 50 grand a year. If you want money quick though, high risk portfolios and cross your fingers.

Answer 9

read Automatically millioner

Answer 10

No, You are never to late. and it's never to early.