What is the smartest way to invest my $ for retirement?

Question

I am 23. Just out of school. I want to start saving for retirement early. I just want to end up with $1.5 million in the end at 60. I need simple. ie Put X amount of $ in for X amount of years to = that amount. I heard Roth IRA is good. Please, anyone w/ finance experience, add your input. I dont like stock market n such. I want to know that my money is accruing interest, and that I will definately have the funds later in life... I do not like risk.

Answer 1

Roth IRA plus a diversified Mutual fund or 401K offered through your work. Don't put all of your eggs in one basket. There are numerous websites that explain the different ways to save for retirement

Answer 2

I've seen the numbers for Roth versus Traditional IRAs and in some cases the Traditional works out better.

The key to the best in investment is to START AS EARLY AS POSSIBLE. No matter what calculation I've seen on this, starting now versus a month or a year is a big difference.

I also reccomend Traditional IRAs because they are tax deductable. With Roth IRAs, you have to front up the money yourself, with a Traditional IRA, you pretty much start with money you do not have if you look in terms of taxes. Just an idea, instead of using your 2006 Tax Refund for credit card bills or something else, start a traditional IRA.

As for which IRA, look for something with an agressive growth option. Unlike what the daily news wants you to believe the market has been growing and growing and not really going down. The S & P 500 is a pretty good indicator of this. It looks like 2007 is going to be a decent growth year, so might as well start.

Everyone will talk about risk; there is risk with all of the funds that you'd be interested with. Except for a couple of government funds which are somewhat insured, you'll only collect 1% or 2% per year which is nothing you do not want.

Stick to a big company, Fidelity, Charles Schawb, etc. Although they require a big initial opening investment to begin working with them, most of the funds are very proven and their practices are very ethical.

Good Luck & START EARLY

Answer 3

Mostly good answers so far ( except the person that thinks saving $ 1000, a year is going to do it !!)
Your first step should be the ROTH IRA... and if you invest your first one with a company like Fidelity..in a conservative mutual fund, you may see how beneficial ( and easy) it is to invest. Get familiar with their web site and learn a little now and again when you're sitting at the computer with " nothing to do" or just some rainy day when nothing's on T.V.
Add to the IRA every year and maybe learn to move the funds around and get better returns.
MSN has a site http://monetcentral.msn.com/beginnerguide.asp?page=introduction
It could help you understand what all the above answers are talking about.
...or www.Fidelity has phone numbers for representatives that can tell you how to get started.....and they don't seem to be pushy...or talk "over your head"
And I hope you end up with more than 1.5...because by that time that'll be the price of a loaf of bread!!

Answer 4

You say you don't like risk, the biggest risk you can take is not investing for your retirement with the stock market. The stock market grows, that is why trillions of dollars are invested in businesses around the world. Many companies will do better than others, which is why you need an expert to help you with your investments, but if you stay away from the stock market, that is not smart.

Getting started while you are young is very smart. You can contribute $4,000 per year in a Roth IRA. If you invest in a mutual fund, then you are investing with thousands of other people and grouping your money together to get a better return. I highly recommend this approach. You can review the past performance of the investment in order to see if the management is good at getting results.

If you can save every month consistently, your account will grow faster than you would have guessed. I invest in the stock market with mutual funds. I don't take high risks and my account is 5 times larger than the amount I originally invested.

Answer 5

That gives you 37 years to save. If you put the money into a cash account such as a money market and you average 3% it would require a savings rate of $22,007 per year! By IRS rules you cannot even put that much into a Roth-IRA, it is capped at $4,000 per year and will go up periodically. There is no way to predict what your rate of return will be but you can be sure it will fluctuate with the interest rate environment, based primarily on the fed funds rate.

Alternately if you put the money into a diversified stock/bond/cash portfolio and you average 10% return per year you would require just $4,132 per year of savings.

Here is a little more to think about:
Rate of Return/Required Annual Savings Rate
3%/$22,007
4%/$17,653
5%/$14,057
6%/$11,119
7%/$8,743
8%/$6,839
9%/$5,326
10%/$4,132

Also why $1.5 million? What is the significance of this number? Based on an inflation rate of 3% the present value of $1.5 million is $502,474 which is not a lot to retire on in todays dollars. I suggest that you speak to a financial advisor and try to quantify your retirement goals based on your current income level projected out 37 years. For example if it takes $50,000 for you to live on today (after taxes and savings) that would be equivalent to $149,261 in 2044 dollars (37 years from now.) How will you generate this much money from a nestegg of $1.5 million if that was your goal?

Also will you have a pension and social security?

Please seek the advice of a professional and you kids don't try this at home! You only get one chance to retire properly, do not rely on rules of thumb or home based financial planning!

Answer 6

I suggest you go find a compound interest calculator and find out how much. Play with the numbers!

If you can get 10% return per year (regular stock market stuff) and you have 37 years to invest, that means you must save $4,544 per year. This will get you exactly 1.5 mill by 60 years of age.

$4,544 / 12 months = ~$380 a month.

If you want to just put it in GIC's or some other crap that pays like 5% a year, then you will need to save almost $15,000 a year to meet your goal. So some risk will be needed to easily achieve your goals, but if you diversify enough you should be okay. Check otu dividend paying companies! They may pay a dividend of 1 to 4% and they can also go up in value.

The power of compound interest is simply amazing!

Answer 7

Your goals of 1.5 million at 60 is probably very easy to obtain. It depends on the investment and the deals you make.
I am at the same place as you. I have been learning some things that can help you. I began studying with Robert T. Kiyosaki. I bought one of his books used!! Rich Dad Poor Dad. I was amazed at how quickly money can grow and how easy money can work for you. He really stresses that many people are not educated about money. We are just told to get a good education, a good job and play it safe. He teaches what the wealthy know and the poor do not. But once the poor learns it they can start a plan to wealth to. The safest investment for you would be, the one you have studied and know the rules and laws that govern it.
If you dont understand gas and oil stocks dont invest in them. If you dont understand mutual funds dont invest in them yet. THe best thing and most profitable thing you can do is LEARN Get his RICH DAD POOR DAD book. It is amazing. I am just a regular person who is just learning. I'm not a salesman for this book. Go to a book store and thumb through it and see for yourself. I find it addicting.

Answer 8

if its for retirement, you can start putting money away into a retirement fund which will be tax free. Search for compound interest for more information but basically if you put in around 1000 bucks in at the end of every year from now until you are 60 you will have plenty more than 1.5 million, especially in a retirement fund.

Answer 9

Roth IRA is good. You have to be willing not to touch the money (you'll be dinged for penalty and taxes). At your age, low-risk investments like mutual funds would be good.

You could speak with a financial counselor for better information. I find the people from Ameriprise to be good.

Answer 10

You are a low risk investor. You need to realize that to be assured of getting an increase in your money (low risk guaranteed return) you will not get a high return. At your age you can afford to take some risk. The S&P 500 stock index has averaged over 10% forever. I think you should put at least some of your money in stocks.