Retirement Planning | Steps to Get Saving
Planning for retirement can be daunting and definitely a subject I wish I learned in school.
After listening to experts like JL Collins and The White Coat Investor, I find planning for retirement exciting. Saving for retirement may be low on your list, and I realize everyone has different life situations, but starting early and saving even a little will go a long way!
Full disclaimer, determine your savings goals before creating a plan. This post outlines five high-level steps that match an aggressive retirement savings goal summarized from lived experiences, countless podcasts, and conversations with financial advisors. This plan will continue to evolve as I get my ish together, but for now, I'm confident in making my money work for me.
5 Steps to Start Saving (In Priority Order)
Step 0: Mindset Shift
- Live below your means and do not get sucked into the "Keeping Up with the Jones’s Syndrome."
- Embrace the amazing-ness of compound interest. Play with this calculator.
- Bring awareness to your spending. Pause before clicking "Order" on a late-night shopping spree and ask yourself, "Is this money better invested somewhere else?" Sometimes the answer is yes.
- Start! Time is on your side and getting started is the best thing you can do for your financial future.
Step 1: Pay Off Debt
Especially high-interest debt (i.e. credit cards or student loans). If you have low-interest debt pacing with or below inflation, it might make sense to invest that money elsewhere.
Step 2: Build an Emergency Savings Fund
Most experts advise you to have 3 - 6 months of your monthly expenses in an accessible emergency savings fund. You don't want to skip this step and have your savings tied up in a retirement account you can't access or will be penalized for accessing.
Step 3: Max Out Your Employer-Sponsored Plan
If you can max out your employer-sponsored plan, go for it! If not, and you have an employer matching program, always contribute the required amount to take advantage of the match.
Step 4: Contribute to Additional Tax-Advantaged Accounts
If you are eligible, save what you can in a Roth IRA. If you are not eligible, consider a Backdoor Roth IRA. (Read carefully before doing this as there are a lot of stipulations, I recommend reading this blog from The White Coat Investors for a full guide!)
Step 5: Open a Taxable Brokerage Account
This step personally comes last to be as tax-efficient as possible. A taxable brokerage account is a great mid-term savings option for 10+ years investment range and will be subject to long-term capital gains tax on earnings. Money invested for less than one year is subject to short-term capital gains tax, read more about this here. As a hands-off beginner investor, I have chosen to go with Betterment due to its user-friendly interface, investment choices, and low fees (.25%). Follow Mr. Money Mustache and his Betterment Experiment for more information on Betterment.
I googled forever to find straightforward guidance in one place to help me figure out my best retired-ish life. I hope this post alleviates some of your "googling" and helps you continue or get started on your savings journey!
What retirement saving tips can you share with the #30ishcommunity?
If you are retired, share ALL the tips on how you are living your best retired - ish life!