[Moe2Moto]

This is all really great advice, my question is, do I put my money in a savings account for retirement, or what do y’all do to make the money you save, accumulate over time?

I’ve stayed away from stocks, because I’ve seen people lose A LOT of money in stocks. A lot of people my age invest, but I consider that a gamble.

I understand some of y’all’s employers had plans, such as, what you save is what they’ll match. Now that does sound great, but I’m not employed in those types of jobs yet.

Any advice on that?

[Watching The World Burn]

Originally Posted by Moe2Moto

This is all really great advice, my question is, do I put my money in a savings account for retirement, or what do y’all do to make the money you save, accumulate over time?

I’ve stayed away from stocks, because I’ve seen people lose A LOT of money in stocks. A lot of people my age invest, but I consider that a gamble.

I understand some of y’all’s employers had plans, such as, what you save is what they’ll match. Now that does sound great, but I’m not employed in those types of jobs yet.

Any advice on that?

Depends on the interest rate offered - the ones I see offer very little interest. Thus, if you want to be conservative, opt for a GIC - should pay slightly better than a savings account.

Personally, you are young, I would go riskier because you have the time to make it back. I'm not talking single stock bets, but ETF's. Invest in one and let it ride. Don't pull out when it goes down. If you have some spare cash, invest more, but otherwise, just steadily sock away money into a few broadly diversified ETF's on a regular basis and you'll likely be in good stead in 30 - 40 years.

I'm 44 and just started in the ETF's now - prior to that it was mutual funds but they have a higher management expense ratio and just not as worth it. That said, I put money in a mutual fund and regularly contributed since 2009 once a year up to about 2022 and I've tripled the money at this point (well, more, but I choose not to try to calculate my exact return - I'm comparing my total inflow to market value right now, but obviously those inflows occurred over 12 years). I still have it, and I'll let it sit there for the next 15 years because it pays dividends that are automatically reinvested each year and it will just grow on its own.

[vreihen16]

Originally Posted by Moe2Moto

This is all really great advice, my question is, do I put my money in a savings account for retirement, or what do y’all do to make the money you save, accumulate over time?

Interest on savings accounts might as well be zero percent if you look at the rates that banks pay you to hold your money. If you're lucky, you may get 3% or so.

Do you have student loans? What is the interest rate on those loans when they come due? The math is left as an exercise for the reader about whether you should save or put that money into not being a slave to student loan payments for 20+ years like others in your age cohort.

I’ve stayed away from stocks, because I’ve seen people lose A LOT of money in stocks. A lot of people my age invest, but I consider that a gamble.

The usual rule of thumb for stock investing given by experts is to buy an index fund that tracks the S&P 500 like ticker SPY and hold it long. Don't try to chase the big score or play with meme stocks. Like a friend of mine who holds a seat on the stock exchange said, pigs get slaughtered. Showing the long hold graph, putting $44 into SPY in 1993 would be worth $677 today:



Avoid student loans, and max out any 401(k) or 403(b) retirement accounts that your future employers offer.....

[Moe2Moto]

Originally Posted by vreihen16

The usual rule of thumb for stock investing given by experts is to buy an index fund that tracks the S&P 500 like ticker SPY and hold it long. Don't try to chase the big score or play with meme stocks. Like a friend of mine who holds a seat on the stock exchange said, pigs get slaughtered. Showing the long hold graph, putting $44 into SPY in 1993 would be worth $677 today:

Attachment 3919610

Avoid student loans, and max out any 401(k) or 403(b) retirement accounts that your future employers offer.....

I currently have no student loans, if I play my cards right, I’ll have little to no debt after I graduate.

Religiously I need to avoid interest as well, so I’d most likely just put my money in another checking account.

I’ve heard of some stocks that just steadily increase over time, I have no intention of selling stocks to make a quick buck, more for long term use.

[KevinC]

Originally Posted by RickFLM4

Started as a CPA. Got tired of the grind and looking for something more rewarding so now I run daycare centers in Minnesota.

[Vindicator3]

Originally Posted by Moe2Moto

I’ve stayed away from stocks, because I’ve seen people lose A LOT of money in stocks. A lot of people my age invest, but I consider that a gamble.

I've made a lot of mistakes in my life, and this is one of the biggest. Thankfully, it was temporary and I fixed it in plenty of time.

When my wife and I were starting out, my view was that 1) The stock market is a perilous place full of risk where you can lose everything; and 2) Retirement money is really important; therefore 3) Keep your retirement money the heck away from the stock market.

So my plan was to invest our retirement savings in the safest possible options and then once we got to a certain level of income and had extra money beyond our retirement savings to play with, put that money in the stock market.

Dumb, dumb, dumb.

What this overlooks is that over the horizon of the rest of your life, when you are in your 20s, you have a far greater chance of being old and poor if you do what I did than if you invest in the stock market. The stock market has bad years and even bad decades, compared to "safe" investments. It has never had a bad quarter-century compared to "safe" investments. With that long of a time horizon, the only thing "safe" investments are keeping you safe from is wealth accumulation.

If you don't want to pay an advisor and you don't want to have to put much time or effort into it, put all your retirement savings into a quality "Target Date Fund" (there are bad ones too), with a "target date" close to the year you turn 70. You can do a little better than that with a little work and a mix of inexpensive index funds. Diversification and low fees are your friends. Overcoming the psycholigical barriers is key. Those barriers can lead you to be afraid to invest in risk assets like stock, or to be tempted to pull everything out when there's a downturn. Resist. Serenity Now. All will be well.

For emphasis - all of the above advice relates to diversified low-fee stock funds. Putting a huge bet (as a percentage of your assets) on some meme stock on RobinHood, or in crypto, or whatever, is not investing, that is speculation and yes you can make a lot of money or make a lot of money disappear doing that. Only do that with money you don't need for retirement. Treat diversified investing in the stock market and speculating as two completely different activities, because they are. But don't avoid investing just because speculating can lead to huge losses.

[Vindicator3]

I went to Copilot AI for some data to back up my essay above. So, if we can trust it to provide good data....

I said above that stocks never did worse than safe investments over a quarter-century. So I asked Copilot what the worst-ever 25-year period was for the S&P 500. It tells me that this was the period that began just before the 1929 market crash. If you put your money in to the index then (and reinvested dividends), you made 3-4% average annually, or about 1% over inflation. Point being that, historically, even if you invested all of your funds on the single worst possible day you didn't lose any money if your time horizon was long enough. Of course, you won't invest all your money on the worst possible day, you'll invest it every pay period over the course of your career, and in hindsight some of those days will turn out to be bad timing and some will turn out to be great timing.

(Edited to add: I went back and asked it how you did over 25 years if you started at about the worst possible time (January 1929) but instead of investing one lump sum at the beginning and that was it, you invested equal amounts every month over the 25 years, much more like what you'll do during a career. In that case, even though you were starting at the worst possible time to start for stocks, you still made about 6% per year over the 25 years on all the money you put in.)

And of course, the whole thing could go to zero if we have global nuclear war, total societal collapse, or any of a number of other apocalyptic scenarios, but if those happen, money in the bank or under your mattress isn't going to help much either.

For sake of comparison, if you invested your money on the best possible day, in 1982, you made 14-15% annually over the following 25 years, or 10-11% annualy in excess of inflation. Hubba hubba!

Simply put, you have to make a shit ton of money or work a hell of a long time or save an enormous percentage of your income if you want to be able to save for a "dentist-level" retirement but you only invest your retirement savings in the "safest" options. The way to get there by 60, or 65, or 70, is to start early, invest in diversified low-cost index funds, mostly stocks, and resist urges to withdraw, time the market, etc. along the way.

[dcstep]

Originally Posted by Moe2Moto

lll
I’ve stayed away from stocks, because I’ve seen people lose A LOT of money in stocks. A lot of people my age invest, but I consider that a gamble.

...

Actually, at your young age and diversified investing in stocks, via ETF and stop-losses is THE way to invest for your retirement. Take a course or two.

Some dumb asses put all their money in one investment, like one stock or bitcoin or a big roll of the dice. You want an ETF that mirror a broad market. To start. Study and learn to become a smart investor.

[zx10guy]

Consider investing in these funds. VTI, SPY, and QQQ.

VTI is a fund that provides broad stock market exposure.

SPY is a fund that tracks with the S&P500.

And QQQ is a fund that tracks the top 100 companies in the NASDAQ.

However you decide to invest your money, you should always be buying. Many people use dollar cost averaging where they put in a certain amount each month into their investments. This helps smoothen out the ups and downs in the market.

But consider this, when the market is down, everything is on sale. Which means quality funds/stocks are at a discount. Buying during these dips allows you to get more shares for the dollars you invest. Some will actually buy more when the market is down.

[Vindicator3]

I would not neglect international stocks. The Vanguard "total market" ETFs are cheap and good and very diversified.

You could do a lot worse at your age than investing your retirement savings in, say, 60% VTI, 30% VXUS, and 10% BND. That's 60% in the broad US stock market, 30% in the broad non-US stock markets, and 10% in the broad US bond market.

Adjust your bond percentage lower for higher volatility and higher returns over time, adjust it higher for the opposite. At your age, the lower the better and even zero has a great case, but the real key is to put it where you won't be tempted to panic in a stock downturn. If you need a 40% bond allocation to feel comfortable riding out the ups and downs, do it. It's higher than I would do, but it's a lot better than going 90% stocks and then panic selling at the bottom of a downturn. You have to know your own psychology. In that vein it can help to avoid financial news.

Another thing to consider is Roth opportunities. If you become a dentist, it won't be long before you make too much money to contribute to a Roth, so try to make your max allowable contribution to a Roth account (invested per the above) now and every year until you start making the real money. I know you're in school, but if you can scrape together a few k each year to do that ($7,500 is the max per year), you'll be glad you did. Unfortunately, the max is "use it or lose it" every year - you can't skip four years while you're in school and then contribute 30k when you get out and get a job.

[XutvJet]

Originally Posted by Moe2Moto

This is all really great advice, my question is, do I put my money in a savings account for retirement, or what do y’all do to make the money you save, accumulate over time?

I’ve stayed away from stocks, because I’ve seen people lose A LOT of money in stocks. A lot of people my age invest, but I consider that a gamble.

I understand some of y’all’s employers had plans, such as, what you save is what they’ll match. Now that does sound great, but I’m not employed in those types of jobs yet.

Any advice on that?

Saving accounts are terrible vehicles for retirement savings. People telling you to stay away from stocks and the market clearly have no idea what investing is and are likely folks that will never be able to retire or were born rich. Don't listen to them, IMO.

Investing is freaking easy. Take it from someone that's been in the market since the late 1990s and weathered all the financial storms in the last nearly 30 years and someone who's made a lot of mistakes.

1) Buy the very simple to read book called "The Little Book of Common Sense Investing". It's redundant as hell, but the point is S&P 500 index funds are the path for most to a healthy retirement.

2) Do not hire a financial advisor and do not buy actively managed and high fee/expense ratio (ER) funds. NEVER. Been there, done that, and lost out on a ton of money and growth.

3) Open a Vanguard, Fidelity, etc. account and open a Roth IRA.

4) In your 20s through early 40s, have about 80% in S&P 500 index funds, 10% in international funds, and 10% in bond funds.

5) If your employer has a 401K and they do a match, invest your salary up to match. Invest in bonds and maybe some S&P 500 index funds or international funds. Make sure they have low ERs (i.e., less than 0.5%, ideally more like 0.05%).

6) Live within your means. Be patient. Be focused. Accept the fact that you aren't going to have the really nice stuff early on. Don't get caught up in comparing yourself to others that have nice stuff. That shit is financially dangerous. A vast majority of the people that have really nice things are broke as hell.

7) Learn to DIY home repairs, home improvement, car repair, etc. It pays to be handy and be able to fix stuff. I'm not saying learn how to install HVAC, build a two story deck, or rebuild an engine, but to be able to paint, replace a faucet/toilet, replace brakes, etc. goes a long way. I've saved easily saved hundreds of thousands over dollars over the years doing things myself. Every year, I get more confidence to fix more complicated things. And tools, God I love my tools. Good and the right tools go a long way.


With all this said, it doesn't mean you can't have fun either and need to live on rice and beans. It's a balance. I had a lot of fun in my 20s-30s, drove fun cars that were affordable and that were easy to work on, bought a starter home and learned home improvement, all the while socking money away in our Roth IRAs, 401k, and other investment accounts which have snowballed. My house was paid off over 10 years ago, I carry no debt, cars are bought with cash. I'm 51 and plan to retire in 2 or so years. I do not have a high paying job either. I bought my first BMW (a new 2016 M235) in 2016 at 41. Currently drive a 2018 M2 DCT and a 2011 Cayman base 6MT. Both cars were 6+ years old when I bought them. It all the car I want. I can die happy. I do want a truck to go with my sports cars, something old and cheap that I can mod/restore.

[ezaircon4jc]

How'd we get from what one does for a living to retirement strategies?

[Moe2Moto]

Originally Posted by ezaircon4jc

How'd we get from what one does for a living to retirement strategies?

Advice for someone wanting to live a good life.

[JJ 911SC]

Originally Posted by ezaircon4jc

How'd we get from what one does for a living to retirement strategies?

The only good one, Buy Low - Sell High

[zx10guy]

Originally Posted by Vindicator3

I would not neglect international stocks. The Vanguard "total market" ETFs are cheap and good and very diversified.

You could do a lot worse at your age than investing your retirement savings in, say, 60% VTI, 30% VXUS, and 10% BND. That's 60% in the broad US stock market, 30% in the broad non-US stock markets, and 10% in the broad US bond market.

Adjust your bond percentage lower for higher volatility and higher returns over time, adjust it lower for the opposite. At your age, the lower the better and even zero has a great case, but the real key is to put it where you won't be tempted to panic in a stock downturn. If you need a 40% bond allocation to feel comfortable riding out the ups and downs, do it. It's higher than I would do, but it's a lot better than going 90% stocks and then panic selling at the bottom of a downturn. You have to know your own psychology. In that vein it can help to avoid financial news.

Another thing to consider is Roth opportunities. If you become a dentist, it won't be long before you make too much money to contribute to a Roth, so try to make your max allowable contribution to a Roth account (invested per the above) now and every year until you start making the real money. I know you're in school, but if you can scrape together a few k each year to do that ($7,500 is the max per year), you'll be glad you did. Unfortunately, the max is "use it or lose it" every year - you can't skip four years while you're in school and then contribute 30k when you get out and get a job.

Yes, Roth. As you stated, I had quickly advanced in my yearly salary where I couldn't contribute to a Roth account I had opened. I made the mistake of focusing on maxing out the allowable yearly contributions to my 401k without considering all the advantages of what money invested in a Roth brings.

I'm currently correcting that problem as my current employer has a Roth 401k. So I'm not under the income limitations anymore. I'm playing a bit of catch up now to get the Roth component in my investments up.

Also, I've been contributing to a standard brokerage account. I started that back in 2014. But the divorce devastated what I had put in...(ex wife put in zero). So I've been rebuilding that account since the divorce.

The ideal situation is for you to have three different buckets of money to draw from at retirement to work around the tax codes to your advantage. With my 401k, I was leveraging the fact I can save on taxes now since I'm in a pretty high tax bracket. But money in IRAs (from rollovers) and my 401k are going to be taxed as ordinary income when I draw from them. Also they're subject to required minimum distributions. With a Roth, you're using after tax dollars but when you pull the money out at retirment, it's all tax free and are not subject to required minimum distributions. And my brokerage account, I can pull money out at any time. But the gains in the account are only taxed at the lower capital gains rate.

Having all three account types allows you to plan distributions where you ensure you're in a certain lower tax bracket at retirement.

[dcstep]

Originally Posted by zx10guy

Yes, Roth. As you stated, I had quickly advanced in my yearly salary where I couldn't contribute to a Roth account I had opened. I made the mistake of focusing on maxing out the allowable yearly contributions to my 401k without considering all the advantages of what money invested in a Roth brings.

I'm currently correcting that problem as my current employer has a Roth 401k. So I'm not under the income limitations anymore. I'm playing a bit of catch up now to get the Roth component in my investments up.

Also, I've been contributing to a standard brokerage account. I started that back in 2014. But the divorce devastated what I had put in...(ex wife put in zero). So I've been rebuilding that account since the divorce.

The ideal situation is for you to have three different buckets of money to draw from at retirement to work around the tax codes to your advantage. With my 401k, I was leveraging the fact I can save on taxes now since I'm in a pretty high tax bracket. But money in IRAs (from rollovers) and my 401k are going to be taxed as ordinary income when I draw from them. Also they're subject to required minimum distributions. With a Roth, you're using after tax dollars but when you pull the money out at retirment, it's all tax free and are not subject to required minimum distributions. And my brokerage account, I can pull money out at any time. But the gains in the account are only taxed at the lower capital gains rate.

Having all three account types allows you to plan distributions where you ensure you're in a certain lower tax bracket at retirement.

Good points.

Readers should not automatically assume that a Roth is the way to go. For instance, if you're in California and your Federal tax rate is 39% and you state tax rate is 12%, and you can defer $20,000 or more and there is some matching, then you'll only have less than $10,000 to invest in a Roth, rather than $20,000 in the traditional 401(k). Same goes for IRA. Even in the lowest tax brackets, Roth is sketchy when you consider the NEGATIVE first year investment income that goes out as taxes. Do a discounted cash flow analysis and Roth often blows up vs. a traditional retirement account.

Another thing to consider is that 401(k)s and IRAs turn Capital Gains into Ordinary Income. At 78, I only take my Required Minimum Distribution out of my IRA and use Capital Gains out of my regular investment account to fund my lifestyle (BMWs, travel, fine dining, etc.) My effective tax rate is around 15% on a mid six-figure, all-in income, of RMD, SS and Capital Gain/Loss Investment withdrawals. (I don't have a lot of investments with losses, but I do "mine" those annually, but that's an advanced class).

[Vindicator3]

Originally Posted by dcstep

Even in the lowest tax brackets, Roth is sketchy when you consider the NEGATIVE first year investment income that goes out as taxes. Do a discounted cash flow analysis and Roth often blows up vs. a traditional retirement account.

I agree that one should do this analysis. I'm not sure I agree with "even in the lowest tax brackets," but do the analysis, comparing current tax rate to expected tax rate in retirement. The best use case for Roth IMO is the OP's exact use case - he'd in college now with several years of college and dental school to go, during which he's presumably in a very low tax bracket, but then he will be a practicing dentist and in a much higher one. For him, maxing Roth now (to the extent he can scrape the money together) is a no-brainer, then switch to traditional 401k while he's practicing. The best use case for traditional IRA/401k and avoiding Roth is someone at or near their earnings peak who expects to be in a lower tax bracket at retirement (due to lower taxable earnings, moving to a lower-tax jurisdiction, or whatever reason). Of course, predicting what Congress and your state will do with tax rates and brackets in the future is difficult to do with precision.

Originally Posted by dcstep

Another thing to consider is that 401(k)s and IRAs turn Capital Gains into Ordinary Income.

This is a good reason to consider putting your retirement savings in taxable accounts rather than 401 or IRA as you get closer to retirement (depending on your tax bracket then vs expected tax bracket in retirement), but IMO the OP is way too young to avoid 401 or IRA in order to avoid having withdrawals taxed as OI. For anyone not in the last 10 years before retirement, it's hard for me to think that giving up the tax deferral will be a net advantage just because of the OI vs capital gains issue during retirement.

[dcstep]

Originally Posted by Vindicator3

... The best use case for Roth IMO is the OP's exact use case - he'd in college now with several years of college and dental school to go, during which he's presumably in a very low tax bracket, but then he will be a practicing dentist and in a much higher one. For him, maxing Roth now (to the extent he can scrape the money together) is a no-brainer, then switch to traditional 401k while he's practicing. ...

Exactly, I concur. This why I addressed my post to "readers."

Dave