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Your Tell-All Guide to Saving for Retirement

I'm Britt, the co-founder of Dow Janes, and 
every single week I have someone asked me   how they can start saving for retirement 
or how much they need or if it's too late   to start saving. Today, I'm going to share my 
top tips for starting to save for retirement.   And don't worry; it's easier than you think.
If you want more ideas for saving, investing,   and making the most of your money, 
don't forget to hit the subscribe button   and the bell so you don't miss any new 
videos. And if you liked this video,   definitely give it a thumbs up.
All right. So, there are some misconceptions   about retirement saving that I want to address. 
First, one thing people often ask us is how much   do I need for retirement? What's the magic number? 
And the truth is it varies widely.

It depends on   where you want to live or what lifestyle you 
want to have or when you want to retire. Are   you trying to retire at 40 or at 70?0.
If you take anything away from today, I want   you to just start saving 20% of your pre-tax 
income for your retirement, and you'll be fine.   To learn more though, keep listening.
Okay. So how do you start saving for   retirement? What you do is you follow the roadmap 
steps. You make sure you're doing things in the   right order. So we have a whole nother video 
on the roadmap steps, but just to recap,   the first thing you want to do is make sure 
you're spending less than you make each month.
  The second thing is to pay off any 
high-interest rate debt you have, which is   anything with an interest rate over 7%, then 
you want to build up an emergency fund.

And   then once you have those three things in place, 
you're ready to start saving for retirement.   So, to do that, you're going to find your monthly 
savings number. You can use a simple retirement   calculator to figure out how much you want to have 
in retirement. I'll link to one in the description   below. What you'll do is you'll add in your 
current savings, anything you've already saved   for retirement already, anything you expect to get 
from social security, and then you'll adjust the   savings amount to see exactly how much you need 
to save each month to be on track, to meet your   retirement goals. It's a super easy calculator, 
you just enter the numbers. It'll spit out exactly   what you need to do, and that number, that savings 
amount, that's going to be your monthly goal.
  So, if you don't already have an account, 
you'll open up a retirement account,   and that's where you'll begin to transfer that 
savings amount to that account each month.
  Where should you save your money? There are 
different types of retirement accounts.

So,   if your employer offers matching, then you'll 
want to open a 401(k) or 403(b). In addition,   you can open a Roth IRA or a traditional IRA. 
IRA stands for Individual Retirement Account.   If you're self-employed, you can also open a SEP 
IRA. So for the Roth traditional or SEP IRAs,   you can open those at any brokerage places 
like Vanguard, Charles Schwab, Fidelity,   or with a robo-advisor like Wealthfront or 
Betterment. Any of those places offer retirement   accounts. So, it's super easy to get started. 
Then if your employer offers 401(k) matching,   you definitely want to advantage of that.
So, what is 401(k) matching? It's when you   save money for your retirement and your company 
contributes the same amount that you save.   They'll often match up to a certain amount 
or a certain percentage of your salary.
  So, if your company matches 4% of your 
salary and you make $5,000 per month,   you could contribute $200 per month towards your 
retirement, and your company would contribute an   additional $200 per month.

So you basically get 
$200 in retirement money for free each month.
  It's a way for companies to incentivize 
their employees to save for retirement.   So, if your employer offers this, definitely take 
advantage of it. It's the easiest free money out   there. And make sure you're contributing the 
maximum amount that they're willing to match.
  Okay. The next thing you'll do, if your employer 
doesn't offer matching, or if you're, um, if   you've already maxed that out, the next thing 
you want to do is max out your contribution to   your Roth or your traditional IRA. So, each year, 
the IRS limits the amount that you're allowed to   contribute. In 2021, the amount is $6,000.
If you're over 50, you have an extra bonus. You   can contribute $7,000. So, try to contribute the 
maximum amount to those accounts each year. So,   max out your 401(k) to where your company matches 
max out your Roth or your traditional IRA. If   you're self-employed, you could also contribute to 
your SEP IRA. If you're a great saver and you're   saving more than those amounts, you can open 
your own brokerage account.

So, a non-retirement   account, and save the money there. You can use 
that money for whatever you want, but you can   know that you're saving that for retirement.
Once you've saved the money in those accounts,   what you're going to do is invest that savings. So 
for the easiest and simplest way to get invested,   you'll invest in target date funds. These 
are pre-made portfolios that allocate your   money to a mix of stocks and bonds that 
are appropriate based on your age.
  If you want to invest in index funds yourself, 
or if you're picking a fund that your employer   offers, then you can use these rules of thumb. 
Generally, you want your portfolio to be invested   in the percentage of stocks that is equal to 
120 minus your age.

So if you're 20 or younger,   you want to have 100% of your portfolio 
in stocks. If you're 30, you want 90%   in stocks, for example. And just a quick 
note that if you invest in target date funds,   that will do that for you. The allocation 
changes the allocation of stocks and bonds   changes over time as you get older.
One quick thing to know is that you   actually don't need to take your money, your 
retirement money, out the year that you retire.   You can leave it invested while you're in 
retirement and just take out what you need,   which means you actually have more time 
than you think for your money to grow.
  So, hopefully that gives you some peace of mind. 
If you're getting started later in the game,   if you're wondering how much you should be 
saving in retirement savings each month,   we have a couple of rules of thumb for you.

the bottom line is the sooner you start saving for   retirement, the less you actually have to save, 
because if you start sooner and you invest that   money, it will grow and it will grow over a longer 
period of time. If you're starting later in life,   you have to save more because it has less 
time to grow. So, if you're in your twenties,   you can save 15% of your pre-tax income each 
month and you'll be set. If you're starting   in your thirties, you want to save 20% of your 
pre-tax income. If you don't have anything saved   and you're just starting to save for retirement in 
your forties or your fifties, you'll need to save   even more since you're starting later and your 
money has less time to grow. If this is you, watch   out for our next video on how to start saving 
for retirement if you're in your fifties.
  All right, the sooner you start saving for 
retirement, the easier it is.

So, here's a recap   of the steps: One, follow our wealth building 
roadmap, so you know what to do in what order.   Two, find your monthly savings. Number three, open 
a retirement account. Four, take advantage of free   money. Five, max out your contributions. Six, 
invest your retirement savings, and seven,   contribute to your retirement savings each 
month. If you want to learn more about how   to build your wealth and invest your retirement 
savings, then definitely check out our webinar,   Think Like an Investor. The link's in the comment 

All right. Thanks for watching..

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