When I started working at 24, a friend of mine (a few years older than me) asked me if our company had a 401(K) and what was the match.
I was confused. What's this gobbledygook? So I asked around and got him the answers, and he responded with: max out your 401(K). Just do it. And do not ever think about taking money out of it.
So I followed his advice. At that time, the ~$5500 cut in paycheck (my gross was around $35K, IIRC) stung a little. I was single, footloose and fancyfree, and those extra few hundred dollars a month would have been fun to have. But I stuck to his advice.
Today, almost 30 years later, thanks to that, I have a nice nest egg and don't have to worry about retirement (modulo catastrophic illnesses, of course).
So recently my friends' kids started working, and I gave them the same advice: Max out your 401(K), pick a Vanguard Target Retirement fund, and forget about it. If your place offers a "Mega Back Door" option, use it to the fullest extent possible. And if your company has a HDHCP, put funds in your HSA too.
We have a lot of avenues to save these days. Make full use of them.
> We have a lot of avenues to save these days.
Consider investing your time, not just your money. In other words, do careful research, start a business, then put your labor into offering a product or service that fills a need, instead of simply working for someone else. If you fail, you'll still learn a lot for another try. And if you succeed, the payoff can be much larger and faster than anything else you might attempt.
I’m in my 30s. Very very few of my friends have been able to match my tech income (and investment portfolio my tech income gave me) with their startup or local business.
Many of them are realizing how far behind they are with someone that stuck with their tech career for 15 years.
The reality is you'll probably lose a ton of money, then get another job.
I used a lot of the money I could have 'saved for retirement' on a house instead. Given how fast housing prices have risen and the compounding issue of the cost of rents, I'm not sure I'm too far behind. If you look at REITs, which combine the value of housing appreciation with increased values of rents, they are beating stocks in general over the period I've been working.
You might actually be worse off saving for retirement, at early career stages. Of course, some will point out retirement savings are tax protected, but so are modest capital gains on primary residence.
https://i2.wp.com/financialsamurai.com/wp-content/uploads/20...
> You might actually be worse off saving for retirement, at early career stages.
A very well-diversified, international fund usually performs at 8% annually which is far more than you would get holding REITs (or worse, properties themselves). What you invest for (e.g. education, retirement, projects) is irrelevant as long as your time horizon allows for crash recoveries (measured in decades at worst and months at best).
REIT is largely a reflection of property appreciation plus rents, which is the opportunity cost of not owning your own property. The link I posted was showing an 8+% return once accounting for both over the a 20 year period that doesn't even include the recent COVID era price explosions.
> The link I posted was showing an 8+% return
If I'm not mistaken, they usually pay at least 3% dividend which is added to your salary. ETFs don't trigger any tax as long as you don't sell. And I didn't check but REITs probably have higher annual fees.
I was using REITs as a proxy for the value and opportunity cost of buying your housing rather than investing in a retirement account. If you actually buy REITs this breaks down because REIT capital gains are taxable, while residence capital gains on a primary residence of modest value are not.
It was not my intent to convey you should buy REITs instead of a place to live.
After early career this breaks down though, because the tax advantage are only good for primary residence modest value homes, it's not a strategy that can be continually employed.
> 8% annually
Historically, yes - but the last 5 year average has been ~14% (I guess it's like ~9% if you're adjusting for inflation). I think 10% is a bit of a better number these days.
That's not to say I couldn't be eating my words when the market crashes tomorrow, however.