Retirement planning, or, aren’t you too young for that?

I think it’s funny when people comment that I’m too young to be thinking about retirement. Well, I’m probably too young to be fantasizing about moving to Spain and living out my days near the ocean, but I’m not too young to be putting aside some money each month to fund whatever my retirement fantasy becomes as I get older.

At this point, my husband and I only use pre-tax accounts for retirement savings. We each have an IRA (mine’s a Roth, his is a traditional) and have pre-tax savings through our employers. My husband’s IRA is a managed account through his credit union financial advisor, while mine is through Fidelity.com where I chose a mutual fund in which to put my IRA dollars.

We have our reasons for choosing what we did. I am much more savvy about investing and interested in the process, so I’m comfortable choosing my fund and sticking with it in good times and bad (mostly bad lately… oh well). My husband doesn’t like to think about his finances as much, so he’s more comfortable working with a professional and taking his advice.

I mentioned the 401(k), 457(b), etc. accounts in my previous post about budgeting. The really nice thing about those accounts is that we never even see the money. Instead of seeing the money go into the checking account, and then having to set it aside, it’s taken out of our checks before it even hits the checking account. It’s automatic saving, and we’re actually putting the recommended 15% of our income toward retirement savings already, even though it’s not until Baby Step 4 that Dave Ramsey gets us to retirement savings. This is because we know the value of starting earlier rather than later. Check out the impact of time PDF in this blog entry for a demonstration of the power of time.

Playing around with a calculator like this one can give you a vague idea of how much to be saving. I really like the planning tools that Fidelity.com offers, but those are only available if you have a Fidelity account. Even saving a little is better than saving nothing!

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