When I started working with Julie for the Money Fix, she was great with budgeting and saving—but investing overwhelmed her. So I drew up a simple action plan.
- Research investment options. Julie has a military service background, which means she has a Thrift Savings Plan (TSP), as opposed to a 401k. She also was interested in opening a Roth IRA with USAA, formerly the armed forces credit union, but now open to the public.
We reviewed the difference between 401k-type plans versus IRAs (the different terms and contribution limits); the basics of active and passive investing using index funds; and how to identify your ideal asset allocation given your age.
I explained why I like index funds and target date retirement funds (they are inexpensive, can deliver good returns over time, don’t require you to do a lot of work).
Then I asked Julie to read over her investment options through her TSP and at USAA. That way, she could select the right allocation for the funds she wants to set aside for retirement.
- Play around with FireCALC.com. Translating the often large and nonsensical numbers of retirement into real life can be frustrating. I advised Julie to check out the retirement calculator on FireCALC.com and try different scenarios. Then she could better adjust her spending in order to save the right amount for her future.
Investing can seem daunting, but it’s not out of reach. The key is to understand your goals and options. Now that Julie does, she’s on track to having a fantastic retirement plan.