Home > Article
Investing in Your Future
Managing your money wisely during your twenties can make a remarkable difference in the long run.
"To put things in perspective: If you put $2,000 in your Roth IRA for the first 10 years of your working life and then never contribute again, you will be able to retire at the age of 60 with between $500,000 and $1,000,000 in your Roth IRA."
Add all of these expenses together and subtract this sum from your after-tax income. Yasuda suggests that you then put some of the remainder (hopefully there's a remainder) aside in a savings account for emergencies. The money that is THEN left over is what you have to invest. So where do you put it?
A Roth IRA
To put things in perspective: If you put $2,000 in your Roth IRA for the first 10 years of your working life and then never contribute again, you will be able to retire at the age of 60 with between $500,000 and $1,000,000 in your Roth IRA (assuming a rate of return between 10.5 and 12 percent). A 40-year-old who contributes $2,000 for 20 years won't end up with this much money.
Though smaller investment firms and local banks will be able to open a Roth IRA for you, Yasuda suggests working with a large brokerage house or commercial bank because there is much less risk that a large company will shut down. Keep in mind that the financial calendar ends April 15th, but the earlier you put in money, the more time your investment has to grow.
A 401(k) Plan
Most employers give you investment options for your 401(k), such as a fixed income fund, a money market fund, or a variety of equity funds with different risk exposures. Yasuda encourages anyone with little investment experience to choose a broad mutual fund, such as an S&P(r) 500 Index fund or a Vanguard 500 Index fund. While it may sound like more fun to invest in Amazon.com or your buddy's new start-up, it's much wiser to begin with the general equity fund and learn as you go.
Two more things to know about the 401(k): 1) If your employer does not offer a 401(k) plan, you can still start one with any major brokerage firm; and 2) Your 401(k) plan can easily be transferred if and when you switch jobs.
Also, if you want to set aside a small percentage of your money to dabble in online investing, just make sure it's money you can afford to lose and consider it an educational experience. If you want the educational experience without the risk of losing your hard-earned cash, check out the Fortune Stock Tournament. Along the lines of a fantasy football league, the Fortune Stock Tournament gives you $500,000 worth of pretend money to invest in a variety of stocks. Another helpful learning tool can be found on Yahoo!'s finance page. Just look up any stock and then, under "More Info," click on "Msgs," which is a message board that professional and amateur investors alike use to discuss the stock. Though the information posted cannot be substantiated, you can learn a great deal about how people invest and what they look for simply by reading along. For additional information on general investment strategies, we suggest the Education, Planning, and Advice section of The Vanguard Group's web site.
More Related Articles
Could an employee get a promotion without a raise?
During the economic downturn, many employees took on additional responsibilities without extra rewards. What happens if you give someone a promotion without a raise?
Vesting and Exercising
Always, always, always remember that getting stock options is not the same thing as getting shares of stock. The option is the right, but not the obligation, to purchase a share at a specific price, at a specific time. Before you can purchase the shares - or exercise your options - you need that option to purchase. You must earn the right to purchase those shares; you need to become vested in those shares.
Should I show a prospective employer my pay stub?
If a prospective employer asks to see a paystub from your current job, it could be a sign of mistrust that will be difficult to repair once you are hired.
Google Web Search
Didn't see what you were looking for?
powered by Google