I’m 25 years old and I just received my first paycheck. What advice would you give this young person who is interested in preparing for retirement, even though it is 40 years in the future?
Here are some basic words of advice.
- Open up a Roth IRA with a firm such as Schwab. There is no minimum dollar amount to open up an account.
- The maximum amount one can save in a Roth IRA is $6,000 per year.
- Save a minimum of $100 per month or $1,200 per year.
- When the market dips, increase the savings.
- If possible, max out the $6,000 per year.
- Where to invest? I highly recommend using either VOO or SPY. Both Exchange Traded Funds (ETFs) mirror the S&P 500 and this is a benchmark that is difficult to outperform.
- Set up a direct deposit from your savings account into your Schwab account. If you have extra cash, save it until you reach the $6,000/yr maximum amount.
That is it. Very simple to set up, but it does require discipline. That is why I recommend the automatic monthly deposit as that encourages the discipline of saving.