How to Save For Retirement – EP 205

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It is never too early or too late to start saving for retirement. In fact, the best time to start saving is today. Whether you’re just getting started or already saving, join us on this episode as we talk about all the things you need to know about saving that will enable you to be comfortable and secure after you stop working.

There are only four rules you need to remember: make the plan, execute the plan, expect the plan to go off the rails, throw away the plan.

Leonard Snart, Captain Cold

Sponsors:

  • Spring break! Spring break is coming and if you are lucky or have kids home from school, you will get a few days off. We know you’ll be twiddling your thumbs thinking “gosh I wish I had something to do.” Don’t worry, we’ve got you. We wrote a free eBook for you with over 200 things for you to do that will help you save money. Grab your copy at frugalfriendspodcast.com/ebook. Again that’s frugalfriendspodcast.com/ebook. Write it on your to-do list so you can immediately mark it off. You’re welcome.
  • Your Roth IRA!!!! We’re recording this pretty earlier so the IRS has probably changed the tax deadline but let’s pretend its April 14th. This means you have less than 3 weeks to invest in your 2021 Roth IRA. This is important because you can only invest a max of $6K per year so if you miss this year you don’t get it back. So if you’re able to take a 3-week detour on your financial goal and take advantage of this amazing tax-sheltered retirement account do it. If you don’t know what I’m talking about, listen to this episode. 

7 Steps to Save for Retirement

If you’re worried about where to start on planning for your retirement, this guide by Forbes listed down 7 steps to save for retirement and how to maximize your strategy by taking full advantage of different types of retirement accounts.

What Jen + Jill have to say:

According to the Federal Reserve, about a quarter of Americans have no retirement savings at all, and almost two-thirds of non-retired adults are concerned about being able to meet their retirement savings goals. Jill starts off by diving into the first step.

One key step is opening a retirement account. Historically, investing in the stock market offers a higher rate of return than a typical savings account BUT not all investment accounts are ideal for retirement. There are also employer-sponsored retirement accounts, like 401(k)s, and individual retirement accounts (IRAs). In general, both types of accounts are available in traditional and Roth varieties. Both offer tax-advantaged growth of your investment money, but you pick whether you’d prefer an income tax break now or in retirement. You can also set up automatic recurring deposits and open an additional retirement account.

Meanwhile, Jill starts off by diving into the most important step: set your retirement savings goal. The next steps in developing your personal retirement investing strategy include choosing your investments, regularly increasing your retirement savings rate, and keeping things in perspective.

How to Start Investing Money for the First Time

There’s no one-size-fits-all advice for investing. If you’re a first-time investor, you’ll need a basic understanding of how to invest your money the right way. This article from The Motley Fool made a step-by-step guide on how to invest money for the first time.

What Jen + Jill have to say:

Jill agrees that there’s no one-size-fits-all answer here. The best way to invest your money is whichever way works best for you. First thing you should consider is your style. Ask yourself: how much time do you want to put into investing on a regular basis? Are you more comfortable in active investing or passive investing? In order to be more ‘active’ you need time, knowledge + desire. Passive investing on the other hand is the equivalent of putting an airplane on autopilot versus flying it manually. You’ll still get good results over the long run, and the effort required is far less. In a nutshell, passive investing involves putting your money to work in investment vehicles where someone else is doing the hard work (like a mutual fund).

Another is your risk tolerance. Ask yourself: how much financial risk are you willing to take? Related to both personal preference AND amount of time in the market. Lower risk = less % return on investment; higher risk has *potential* for higher returns on investment.

In addition, Jen explored the point on your budget. Ask yourself: how much money do you have to invest? Use ONE Financial goal at a time to free your budget to prioritize that goal. Decide on lump sum vs. monthly investment.

How we're currently planning for our dream retirement

Jill is investing monthly in Roth IRA and building out a portion of their home for short term rental where the revenue from that will go towards retirement accounts.

Jen is maxing out their Roth IRA’s, saving to invest in real estate, building a sustainable business, and learning new skills to build new opportunities.

Thanks so Much for Listening!

Thanks so much for listening and leaving kind reviews like this one!

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Pragmatic Finances
I’m obsessed with financial podcasts. I have listened to Jen and Jill for the last year plus. I love each of their unique perspectives on budgeting, spending wisely, living your best life, not taking yourself too seriously, and practical, no nonsense solutions for your finances. They are silly and zany and knowledgeable. They aren’t afraid to admit if they don’t know something or if they don’t necessarily agree with the philosophy but they still share it in hopes that it will benefit the listeners.I enjoy their perspective as a 40 something RN money nerd 💛

Whitsend5

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