Dear Dr. Don,
At age 24, I recently started a job working for a corporation. I'm interested in individual retirement accounts. I'd like to look at investing in stocks and bonds and learn more about choosing a 401(k) plan. I don't have many expenses. At the moment, I'm living rent-free and making about $60,000 annually.
How should I start to invest? What should I look for and with whom should I start the conversation on retirement savings?
I'd like to retire in a very comfortable position, perhaps even earlier than age 65. My thinking is that I need to make investments for both the short term and long term. Please help me to know where to start.
-- Char Capital
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Good for you! It's hard for adults in their 20s to make investing a priority because they have so many different financial goals competing for that income. By starting soon, you'll get an added benefit of compounded interest from your investments. Simply put, that's the benefit of added time to help your investments gain value.
You don't really have a choice of 401(k) plans once you are in a particular job. If your employer offers a 401(k) plan, it is the only choice. It is possible that you have a choice between a Roth 401(k) and a regular 401(k). With the Roth, you contribute after-tax dollars to the plan. With a regular 401(k), you contribute pretax dollars. With both, any employer matching contribution is made with pretax dollars.