What is the Best Retirement Plan for Young Adults?

Home Investing What is the Best Retirement Plan for Young Adults?

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. 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.

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 (must complete application). 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.

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.

Want free money?

Simply sign up for Aspiration, and the free banking app will give you cash for free, you just relax while it gives you $150 just for opening a new debit card. There’s no catch. This bank account is legit and only takes two minutes to sign up for an account.

I wish you great success in your journey.

The Best Apps to Save You Real Money

We are on our phone a lot, right? Wouldn't it make sense to save money with the best money saving apps?

AppAt a glancedownload
capital one shoppingBestow
Leave your family $1M. Who doesn’t want to be a millionaire? While we don’t all have trust funds waiting for us, there is still a way to provide protection for your loved ones with up to $1 million in term life insurance. You could do this for as little as $8 a month by getting a free quote from Bestow.
Get a $100 bonus at Aspiration when you open and fund an account with $10 or more. Then use your Aspiration debit card to make at least $1,000 worth of cumulative transactions within 60 days of account opening.
Open a new account in the next 24 hours and you could get up to $200 in free stock.
Truebill reviewTruebill
This free app delivers on its promise to save you money effortlessly. You can use it to lower your bills, cancel unwanted subscriptions and bill negotiations.

About the author

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.

On a similar note...

Explore More On

Our Favorite Apps

personal capitalThe First and Only Interest Earning Crypto Account
  • Receive up to $250 Bitcoin bonus when you make qualifying deposits over the first 30 days
  • Receive up to 8.6% annually on your crypto
  • Join the most trusted financial services for crypto investors on the market
aspirationThis Company Will Give You $150 for Opening a Free Account
  • Boost your savings and earn up to 1.00% APY interest on your savings
  • Get up to 10% cash back on your purchases
  • Get $150 bonus when you spend your first $1,000 with your new Aspiration Plus Card
personal capitalGet Up $500 in Free Stock for Joining
  • Commission-free stock, ETF and options trades
  • Get a free stock worth up $500 when joining (must complete application)
  • Simple, easy to use investor platform with no account minimums
sofiAll-In-One Investing That's Easy to Use
  • Invest in stocks, ETFs, crypto, or automated investing in all one app
  • No commissions for stocks and ETFs
  • Complimentary access to SoFi Financial Planners
personal capitalThe Smart and Free Way to Manage Your Money
  • Take control of your finances with the perfect union of technology and highly personalized service
  • Get access to free online financial tools, including retirement planner, investment checkup, net worth calculator and more
  • Digital-first wealth management advisor with 24,000 clients in 50 states
blooom401K and IRA Management
  • Start your free 401k and IRA management now
  • Find and reduce hidden fees
  • Improve your diversification
citEnjoy the Benefits of a CIT Bank Money Market Account
  • A CIT Bank Money Market Account helps you get more from your savings with interest rates for maximum growth
  • Earn over 7x the national average with high-interest rates
  • It now pays to open a money market account with CIT Bank
Do NOT follow this link or you will be banned from the site!