Wanted: Savvy retirement advice for a struggling youth

If the interest rate on your car loan is more than zero, pay that off first. That's basically guaranteed free money, since you're saving on interest. You want to pay it off as soon as possible. I'd do that before worrying about investing. Once you've done that... Does your company match any of the funds you'd put into a 401(k)? If they do, consider funding the 401(k) up to the amount necessary to get the maximum match, because that's free money. If not, or if you put that much in and then still have money left over, open the Roth IRA. Whatever vehicle you choose, given your young age and the fact that you won't need the money for many decades, choose index funds. Vanguard (and many other providers) has what they call a "target retirement date fund," which means that you tell them what year you want to retire (for you 40-45 years from now), and then they invest in funds that are the right level of risk for your age (riskier when you're young and have time to make up for losses, less risky when you get closer to retirement age). Do not invest in any actively managed funds; over time, they usually do worse than index funds. You don't really need a financial advisor to do this. Your investing goals are pretty simple. You want to put money away and not touch it for a few decades. You can do this on your own, and it doesn't need to be complicated or stress-inducing. But think about other goals you might have. Are you planning to move out on your own any time soon? Set up separate savings for that. Do you have an emergency fund so that holidays and insurance and such don't mess up your savings goals? I aim to have 6 months of expenses (not salary, but the amount I actually need in order to house, feed, clothe, etc. myself for 6 months) in a savings account I can access immediately. If you lost your job today, how much money would you need to have saved to pay tuition, food, expenses, etc. for 6 months. Set that aside in a savings account. If you start thinking broadly about your financial goals, it will be clearer how to best save for your various future needs. But first, pay off your interest-bearing debt. Because that's costing you money every month, and unless your rate is near-zero, you'll get a better guaranteed rate of return paying that off than you would in any investment.

My living situation is highly stressful, I have no social life to speak of and I work constantly. I'm doing this to save money so that someday I can get out. It is good to save for retirement, but putting money in a retirement account is not going to get you out of living with your parents. Think about what your actual goals are here. Retiring comfortably is an admirable goal and something worth considering, but it may be worth delaying that to have a comfortable life in your 20's and 30's. I am 32 and I max out a 401k contribution, but I have my own house and am otherwise fairly comfortable in my life already. If my options were either afford my own place and give up contributing to my 401k, or keep the 401k contribution and move in with my parents, I would stop my 401k contribution without a second thought. Your life in your 60's and 70's in not any more important than your life in your 20's and 30's.

Does the 401k get any company matching funds? If so, definitely contribute up to the max of the match, if you can (i.e. if they'll match up to 5%, contribute 5%). Vanguard has some great http://www.vanguard.com/us/funds/vanguard/TargetRetirementList funds- you pick the fund projected to when you turn 65 or so, and they'll automatically update your asset allocation for you as years go on, saving you the trouble of having to do it yourself. All you have to do is contribute and not touch the money (at all, ever, ESPECIALLY if you're feeling nervous). As for opening a Roth, I'll be curious to hear what others think; given your modest budget for investment at this time, I think you should probably focus on the 401k, and leave the RothIRA for when you have a little more to contribute. The big difference is the tax setup- contributions to a 401k come out of your paycheck pre-tax, and any contributions you make in the Roth are post-tax.

It sounds like you're doing all the right things. Just the fact that you're doing any long-term financial planning at 24 puts you so far ahead of the game compared to most people. So congrats on that! Will your employer be matching any funds? Many (larger) employers will match your funds up to the first few % of your salary. For example, up to the first 5% of your salary that you contribute to the employer-sponsored retirement plan, they will deposit an additional 5%. If your employer does this, even only 1 or 2%, or only for half of what you elect to contribute, it's basically free money. In that case, definitely go with that plan, up to the maximum match amount. It doesn't matter that you won't be working there forever - 401k accounts can be easily rolled into your next retirement plan if you want to keep your retirement funds consolidated. If there's no match, or you want to save more than what you end up choosing for the 401k, the Roth is definitely a good way to go. You don't make much now, so your taxes aren't high. Presumably you will gradually move into a higher tax bracket (not to mention tax rates themselves), so it's advantageous to go the Roth route. Vanguard is highly recommended by reviewers online, as they have some of the lowest fees. And you can definitely do auto deposits to make it easy!

Congratulations for starting so early. Here are a few key considerations for financial well being. 1) Low cost index investing - Vanguard is pretty reasonable 2) Pay yourself first. If you save 10% of your income in a reasonably conservative vehicle for 40 years you are going to be just fine 3) Always live on less than you make 4) The only debt you should take on is a mortgage 5) Any time you have the opportunity to receive matching funds, do so. Period. 6) Your personal taxation and income situations are unknowable, so putting 50% in a roth and other retirement vehicle is perfectly reasonable Honestly, with your time window if you follow the above, you are very very likely to retire wealthy. Finally, target retirement date funds are pretty weak for people with a 40 year retirement date. I would not even think about that until I was maybe 10 years short of retirement. One of the big issues with them is they are not formulated to include all of your fixed income (government retirement such as social security) so invariably they are overweighted towards fixed income. This is not just my contention, John Bogle says the same thing.

I'm also 24, by the way, and heartily second hush's recommendation of Ramit Sethi's I Will Teach You To Be Rich. Don't let the name put you off. If you want a flavor of the book, he has a great blog: http://www.iwillteachyoutoberich.com/blog/the-worlds-easiest-guide-to-understanding-retirement-accounts/

If your OSA has a delay to get cash in hand, you may want to beef up your checking account a little and use that as an emergency fund. I'm talking like house burned down and you need to buy clothing and food NOW type emergencies or, you know bail money. It's a good thing to have some cash readily available at an ATM and some online savings don't have that convenience to serve as an emergency fund. I think once eligible for the 401k, you should put in just what your employer matches, but not max it out. You should be principally saving at this point to get out of your parent's house. Once you're out on your own and stable, then you can start throwing money at a 401 k above what your employer matches. trying to get anywhere near maxing it out though is going to be a severe lifestyle crunch at 28k, and probably not worth it. Most people need to have a more "long view" approach financially, but it sounds like you might need just a slightly more "i could die tomorrow" thrown in, make sure you live a little.

I started a 403(b) with Vanguard through my job when I was 23 when it became available. I set up a percentage of my paycheck to be deposited every paycheck, and I picked the closest Target Date Fund for my age group. Vanguard has been really responsive and helpful every time I've met with their representatives, and the online system is very easy to use. If your job offers a 401 match and if you will be there, then absolutely do that. If you would like to also open a Roth IRA before that, it seems reasonable. I would speak with a Vanguard representative to see what they suggest and what their options are, given your age and the amount of money being invested. I think their fees have been really reasonable, but you can also look at different packages from other companies.

Vanguard is a perfectly cromulent broker, as is Fidelity, my broker. I think that a Roth IRA is a fantastic way to build wealth, tax free. Since you put post-tax funds into it, you don't have to pay taxes when you withdraw from it. Versus a 401(k) where you put pre-tax money into it, and pay taxes when you start to withdraw in your golden years. I would only contribute to a 401(k) if there is an employer match. Typically 3% to 6% of your total pay. If there isn't an employer match, although you're not saving on your taxes now, a Roth IRA is so great, that I'd sacrifice that, since your money grows tax-free after your contribution. As for which investment vehicle. That's another nod to a Roth IRA. Your employer will have a limited number of funds for you to invest in. A Target Fund (Pick your year and it will automatically re-allocate throughout the life of the fund) is fine. Most of the time though, I find the number of funds to select from unattractive (I make due with an S&P fund, but it galls me to pay management fees.) I'm more aggressive, I like http://www.fool.com/mutualfunds/indexfunds/indexfunds01.htm It's historically been the best return over the long haul, but I'll admit, it can be nerve-wracking if you're risk-adverse. You have to be willing to ride out market downturns over years. It worked out great for me. Kept my money right where it was and kept on investing. I've regained all my losses and added quite a bit to my nest egg. I'm about 25 years from cashing out, so I'll start getting more conservative as that day approaches. You don't want to be stuck holding the bag if the market tanks in your seventies. At any rate, ask any and all questions you may have when you set everything up with your brokerage firm. If you don't understand something, don't put your money in it. You don't want any insurance or an annuity at this point. The exception is disability insurance if your employer doesn't cover it. You are in an excellent postion, one I would have envied, if I had two-brain cells to rub together at your age. (I was a spender.)