Finance Series: Step 1 – Open an IRA

So, you’re well into adulthood and have saved nothing for retirement? Don’t worry; you are not alone. According to the Economic Policy Institute, more than half of Americans have saved $0 for retirement. According to Time magazine, the number is more like 1 in 3 Americans who have saved nothing. Either way, that sounds awfully bleak, doesn’t it?

Do not despair. Believe it or not, there is still time to get started on saving for retirement, regardless of your current age. Can I tell you exactly how much you need in what types of accounts so you can retire at X age? No. That’s what financial planners are for. But I can tell you about my first steps towards saving for retirement and how they helped propel me forward.

The one main and true key to any investment strategy is to internalize this one fact:

The key is to save early and save often.

I know. I just acknowledged that you are no spring chicken. So how, you may be wondering, does this “save early” thing work for you?

Easy. The key isn’t to jump into your TARDIS and start saving from childhood (though that would be great. Also, who wouldn’t want a TARDIS?). The key is to realize that today, right now, you are in the best possible standing when it comes to saving for retirement, more so than any other time yet to come in your life. And if you don’t start saving today, that’s okay, because tomorrow is the next best possible time to start saving for retirement.

See what I did there?

The point is to embrace and accept that the amount of money that you save and where you put it are just the details. The important thing is that you begin. Today, if possible. Even if a little. Because you and I both know you can spare $5 a week. Or $20 a month. Or $5 a month if that’s where you are in life. That’s okay! The amount doesn’t matter. What matters is that you open the account and set it up to automatically have money go into it.

Now, where should you put your precious dollars? I’m so glad you asked.

Get thee to your nearest bank or credit union and open an IRA.

Yep, it’s that simple. No research needed. Sure, there are lots of details to be learned later about different IRAs and investments and yada yada. Do not worry about that today. Money can be moved all around, there are all sorts of options, you are not tying your hands by doing this. Instead, you are doing two things:

  • Creating a habit
  • Putting your money somewhere safer than the stock market but not as low-interest as a traditional savings account – perfect for developing that habit and saving something meaningful without losing your shirt.

Big bank, little bank, credit union – doesn’t matter. Wherever you currently have a savings or checking account has IRAs that it offers to members.

IRA stands for Individual Retirement Account and it’s a type of savings account for money you don’t plan to need for a long, long time. It generally has a higher interest rate than a regular savings account, and has some rules where you can’t easily withdraw your money. That’s a good thing, because it forces you not to spend your money until much later.

There are two kinds of IRA: Traditional and Roth. At this stage of your savings game, it really doesn’t matter which you pick. I started with a traditional because when I started investing, Roths didn’t exist. Yeah, I’m old. These days I have both a traditional and a Roth IRA, plus some other things. It’s good to diversify and have money in different places. But when you are just starting to save for retirement, don’t worry about that. Baby steps, friend. Baby steps.

The difference between the two has to do with whether you pay taxes on the money now or later. That’s really up to you, but you wouldn’t be reading this post if you already knew everything about IRAs. I’ve included a few links below to some good sources for more information, if you’d like to read up, but in all honesty, it doesn’t matter which you pick. The key to is to get started building your new investment habit, and both Traditional and Roth IRAs are a great way to do that.

So, your homework: Go to your financial institution. Tell them you want to open an IRA. Tell them you want to set up automatic deposits into the IRA in the amount of $X every $X (how about $10 per paycheck to start?).

They’ll have you fill out some forms. You’ll sign a bunch of things. Be prepared to show your driver’s license, and name a beneficiary for the account. Then, every month, watch your statement and see your account balance grow. You won’t even miss the money you’re putting in there, I promise. You’ll thank me for this when you’re old. And in coming blog posts, I’ll go into more detail about other things you can do with IRAs and other ways you can invest and earn a bigger return, but one thing at a time, grasshopper. One thing at a time.

To do a bit more reading on Traditional vs Roth IRAs, here are some reputable sources:

Additional sources for this article:


Finance Series: Introductory Post

I’m 41 years old, and I have been saving money for retirement for roughly half of those years. I thank my dad for that. He would talk to me about saving and investing so often that it was a normal topic of conversation for me. Thanks to him, I took two key pieces of action when I was in college: I opened an IRA and I started investing in a mutual fund.

I have had both of those accounts ever since, and over time, I have taken other steps to save for retirement, and while I am on track to meet my retirement goals, it is not uncommon for me to meet others in their 30s and 40s who have not started saving for retirement, and who aren’t sure how to start.

I am not a financial planner and have no credentials that qualify me to dispense investment advice. What I do have is personal experience and a low tolerance for being unprepared. I’m also a big fan of money and like finding ways to balance saving as much as possible while living my best life. In a series of upcoming blog posts, I will share some of my personal decisions and the information I have learned along the way.

My upcoming topics include:

  • Open an IRA: I’ll talk about what an IRA is and why (and how) you should start one
  • Invest in a mutual fund: I’ll talk about what that is and how it can be a great way to save a little extra money that you won’t miss and then watch it grow
  • Avoid debt like the plague, except when you shouldn’t: I’ll talk about the difference between good debt and bad debt.
  • Your FICO score: what it is and why it’s important, as well as how to build and maintain your credit history
  • When to co-sign a loan. (Hint: you should never co-sign a loan)
  • Car-buying: How to choose wisely
  • How much to save for retirement: are you wondering how to save for retirement when you can barely make ends meet? It’s possible. If I could save money when earning $9/hour without benefits, so can you.
  • Change your mindset, change your future: How to maximize the retirement benefits from your employer. There is no such thing as not being able to afford to get the full match from your employer.
  • When to hire others to help manage your money. Why have an accountant and/or financial planner, and how to afford them.
  • First steps: I’ll share the first, second, and third steps you should take toward saving for retirement, regardless of income.

What other topics would you like to see in this space?