Adulting 101: Retirement Savings Accounts

In “Adulting 101”, Annie and Juliet cover topics that they wish they knew going into adulthood (like retirement savings), as well as topics they want to learn more about (like recycling). Check out other posts here.

First off, apologies for not I keeping up with this series for the last few months because a lot of stuff was happening – mainly moving apartments and traveling almost every week since August.

I decided to tackle a topic I’ve put off for a very long time: investing. It’s one of those things where it’s like “UGH, it’s so complex and there’s so much to learn! I don’t want to start because it’s a deep, dark hole!” So why not force myself to do it and write a post about it?!

A couple months ago, a friend and I sat down to tackle investing. We are both young females in our 20s, work in corporations and met the company match with our 401(k) contributions, and wanted to or had some other investment vehicles as well. And then comes the onslaught of questions: Which 401(k) fund should we pick? What is an index fund vs. stocks vs. bonds vs. real estate market? How do you decide what to invest in? Which investment company should we go with? What’s the difference between Roth IRA, traditional IRA, HSA, 401(k)?

Jeez. Let’s take it one step at a time, okay?! (That’s me freaking out with you guys.)

Before we get down to the nitty-gritty…

  1. Always check online about specific numbers regarding income eligibility or contribution limits. Numbers vary year to year, so I did my best not to include any of those numbers in case they change.
  2. I am not a personal finance guru or an advisor of any kind. I’m a young female trying to make sure she has money when she retires, and sharing my thought process, steps, and mistakes along the way.
  3. I am speaking about this to readers in America. I’m not sure how the rest of the world works (though that would be an interesting comparison), so if you’re not from America but want to come here… maybe this will help guide your decision.

What retirement savings accounts are available and what’s the low-down on each of them? These are the 3 most common retirement savings accounts.

retirement savings

If you need to see this information in another way, Napkin Finance does a good job.

Now that we know how these accounts work, time for the real question: Which is better for me, Roth or traditional IRA?

This is the guideline I follow:

  • If your company offers 401K company match, definitely contribute to that. Not a maybe, when I have time… always, definitely opt into 401K if there is a company match. Never say no to free money!
  • If your income is below $130,000 (check here for specific numbers), contribute to a Roth IRA first. This is because Roth IRA has income limitations. Once you make more than $130,000, start investing in a traditional IRA.

Okay. I opened up an IRA. What’s next?

To be honest, I’m figuring that out too. You could manage your own funds, or you could get a real-life financial adviser, or you can get a robo-adviser.

My friend and I played with the idea of robo-advisers, like Betterment, Wealthfront, or Ellevest. Ultimately, we thought we could do it ourselves… but I never did anything. I  realized that as much as I am interested in learning and personally doing every single thing regarding my finances, there are other things that are more worth my time. Also, I didn’t do anything because I felt I didn’t know enough to make investment decisions. Studies have shown that women feel more confident when they know a lot about a certain topic, and that there is so much information in the world of investing that I will never feel confident. Now I’m really looking into a robo-advisor.

Upcoming finance posts:

  • Work benefits: It’s that time of year again… selecting your work benefits! Yay….?
  • Robo-advisor: What is it? Why would I choose a robo-advisor? Which companies do robo-advising? How would I choose one?
  • Savings goals: Not only is it important to sock away money for retirement because you don’t want to retire with nothing in your bank account, but it’s important to set some goals as to what you’re saving for.
  • US tax: There’s rarely a time in your life in America when you don’t run into Uncle Sam, so let’s get to know him a little bit.

In all of these posts, I’d love for this to become a discussion so we can all share and learn from each other. Leave comments below!

In other things related to money:

  • When I decided that my post was going to be about investing, this Listen Money Matters podcast popped up on my feed: Retire Happy – Optimize Your 401K Account with Blooom. What perfect timing! I’ll cover this a little bit in the next post.
  • I made my first fiscal donation to help others in need. I used to tell myself that I would donate money to organizations once I made more money. But lately so much has happened all over the world that I asked myself I can help now, so why not now?
  • To learn about the history of corporate income tax, take a listen to this 20-minute Planet Money podcast episode.


Check out other posts in our Adulting 101 series!


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