Advertiser Disclosure

What is the Best Retirement Plan for Young Adults?

Want to Earn Some Extra Money?

  • SurveyJunkie: Earn up to $50 per survey with one of the highest-paying survey sites on the web. Join SurveyJunkie Now
  • Mistplay: Earning money by playing games on your phone sounds like a dream. But this app really pays you for playing new games with cash rewards. Download Mistplay for Free (Android only).
  • Robinhood: This investing app lets you trade stocks and do everything for free and takes no fees — ever. Better yet, if you join through this link you can get a free stock like Apple, Ford, or Sprint when you join (must complete signup).

With high savings rates and long-term investing, I’m planning to retire in less than 10 years with a portfolio large enough to sustain my family’s lifestyle thereafter. I figured out what the best retirement plan for young adults later on in my life. I bought my first stock at 23 years old in my campus apartment, it was some Toronto-Dominion Bank stocks and I sold them the second I made $100 profit off of them. I did not know what I was doing and I was aiming the short-term gains. As soon as it hit my target, I sold.

Looking back at this trade, I would now be $1400 up if I had not sold so soon. Here is the thing with the market, things take time and the real gains will come with a long-term plan. If you’re wondering what makes a good retirement plan, learn from my experience.

What is a good retirement plan?

Learn to invest for the long term

I have since learned a lot about the ups and downs of the market and now solely invest in index funds to diversify risk and take a long-term approach to investing. Selecting individual stocks was just too much of a gamble for me. Even the professionals cannot beat the index over the long-term. 

Nearly 89% of actively managed funds underperformed their benchmarks over the past five years and 82% did the same over the last decade, S&P said. CNNMoney.

The best retirement plan for young adults

When young adults like me are thinking of investing for the next 50 year or so, missing out on a few basis points can really hurt down the line. Not only is it statistically improbable that actively managed funds beat the market but they also charge a lot more fees.

Want free money?

  • Aspiration: Want to get spotted a $100 for free? Simply sign up for Aspiration, and the free banking app will give you cash for free, you just relax while it gives you $100 just for opening a new debit card. There’s no catch, just use your card to make at least $1,000 in cumulative transactions within 60 days of opening an account. This bank account is legit and only takes two minutes to sign up for an account.

Over time, the 1 or 2 percent fee charged by money managers really compound to large sums. For example, if we compare a passive index fund with a 0.15% management fee to a 1% management fee active fund; paying that 0.85% difference would have diminished your earnings by 20% over the next 20 years.

Bottom line: Simply invest in total market index funds and at a certain point, we can simply coast and relax.

How much you need to save for retirement

We do not all need 1 million dollars to be happy and isn’t this the ultimate goal; to be happy? At some point, your savings will be enough to support your basic expenses many options will come to you.

Let’s say you live a nice middle-class lifestyle with a few frugal tricks here and there and you are able to live off $40,000 per year. The traditional amount to safely retire off your investments, according to the Trinity study, would be $1,000,000 invested in a 75% stocks and 25% bonds portfolio.

Even going back a century and testing your portfolio with the Monte Carlo simulation offered in Personal Capital’s retirement tool will give you a high rate of success with such a nest egg. However, you might not want to work that long and would prefer stopping before the million.

Be flexible

That’s where you need to be flexible. If you have been diligently investing for a while, you can always slow down before the ultimate “retirement” if you are flexible.

Some people take mini-retirement every few years where they work for 5 years than spend a whole year off before going back.

Some others cut their hours to part-time work or have side-hustles to sustain part of their expenses.

Choose the best retirement accounts

Next, you’ll want to make sure you have the best retirement account for your situation. Here are seven types of retirement savings accounts to consider:

  1. 401(k) or 403(b) Offered By Your Employer. Tip: Likely a 401(k) plan is the easiest and best place to start investing for retirement.
  2. Solo 401(k)
  3. SEP IRA
  4. Simple IRA
  5. IRA
  6. Roth IRA
  7. Health savings account.

If you need help finding the right retirement account for you, consider using this IRA guide.

The final word

All this to say; there is more than one way to achieve financial freedom but whatever your path, start working on it today.

If you have not started saving yet, start today with automatic transfers and, once you are ready, start investing and make your money work for you.

I wish you great success in your journey.

The Best Investment Apps For Everyday Investors

App Rating CommissionsLearn More
robinhood logo

5.0/5 

Free$0

OPEN ACCOUNT
On Robinhood's website

M1 finance

Games that pay you to play. Yes, we're serious.

These 3 apps will pay you to play games on your mobile device:

  1. Mistplay (Android) - If you have an android device, you can download this app and start getting cash rewards for playing new games.
  2. Solitaire Cube (iOS) - Earning money by playing games on your phone sounds like a dream. But this app really pays you for playing solitaire with cash rewards.
  3. Lucktastic (Android) - This free app offers the same daily scratch-off cards that you find at your local convenience store — but here you can play for free and win real money.

5.0/5

Free$100

OPEN ACCOUNT
On M1 Finance's website

fundrise

5.0/5

0.15%$500

OPEN ACCOUNT
On Fundrise's website

public

5.0/5

Free$0

OPEN ACCOUNT
On Public's website

webull logo

4.9/5

Free$0

OPEN ACCOUNT
On Webull's website

Want free money?

  • Robinhood is a free investing app for your phone. I really mean free all around – free to join and they don’t charge any fees to buy or sell the stock. You can get a share of stock like Apple, Ford, or Sprint for free when you join through this link. The value of the free share may be anywhere between $2.50 and $200 and fluctuates based on market movements. You’ve got nothing to lose.
Avatar
Xyz
We are Mr. and Mrs. Xyz from Canada. We share our thoughts on http://www.ourfinancialpath.com about personal finance, investments, and frugality with the ultimate goal of financial independence. We are aiming to retire at 35 and show you exactly how we do it.

Related Posts

Do NOT follow this link or you will be banned from the site!