By Marci Seamples, MAM, IOM, CFRE, CAP
Director of Development, Naples Zoo
I am not a financial planner, but I am extremely interested in investing for retirement. Why? Quite simply: I do not want to work when I am eighty years old and worry if I can pay my bills.
If your employer does not offer a retirement plan, you may not know there are other options available to you. These are not things we learn about in school and might not be something our parents even knew to teach us about. It can be intimidating and overwhelming if you do not know where to start.
Before we talk about what to do if your employer does not offer a plan, let me briefly mention what to do if they DO offer a plan. First, participate. Second, if you do not understand something, ask your HR person or whoever oversees your company’s program. If you still do not understand something, ask again. Never be intimated to ask to have something explained to you. This is a benefit offered as part of your compensation, you have earned this benefit.
Where to Start
First thing to know – while working with a financial advisor can be extremely helpful, you may not be in a position to involve a professional right when you start. Do not let that stop you. There are many companies, like Vanguard, Sofi, Fidelity, Charles Schwab etc. where you can get started easily online.
Investment Retirement Accounts (IRA)
IRAs are tax-advantaged retirement accounts. You can open one yourself with one of the companies mentioned above or (most likely) through your bank as well. In 2021, If you are under 50 years of age you can put up to $6,000 per year in an IRA, or $7,000 if you are 50 years or older. During the set-up process, you will choose from a list of available investment funds. This may be confusing at first, but there are usually options that take into account the year you want to retire. Say you want to retire in 2040 – look for the fund that is named something like blah blah blah Target Retirement Fund 2040. That could be a good place to start – you can always switch to a different fund later.
Most likely you will also be able to choose between a traditional IRA and a Roth IRA. With a traditional IRA, you do not pay taxes on the dollars you put into your account now – you pay those taxes when you take those dollars out during retirement. With a Roth IRA, you pay the taxes now and pay no taxes when you take the money out in retirement.
Important note: once you put money into your IRA, do not plan to take it out until you are at least 59.5 years old, otherwise there are penalties for early withdrawal.
IRAs for the Self-Employed
If you are self-employed (e.g. independent contractor, freelancer or small business owner), you have another IRA option.
A Simplified Employee Pension (SEP) IRA is a lot like a traditional IRA – the biggest difference is the amount of money you can put into your account per year. You can put up to 25% of your income or up to $58,000 dollars, whatever is the lesser amount, into your SEP IRA in 2021.
There is also a SIMPLE IRA – this is something a small business can set up for their employees and is beyond the scope of this article. Get some help for this one!
I Want or Need to Put Away More Than $6,000 a Year
Folks that can take advantage of an employer’s retirement 401k or 403b program can sock away up to $19,500 in 2021 ($26,000 if you are over 50). So, you may be wondering what else you can do beyond an IRA.
Unless you are interested in this kind of stuff, once you are fully funding your IRA each year, this might be the point to speak to an advisor. If you set up your IRA through Vanguard, SOFI, etc. you can easily set up a brokerage account as well and begin to invest in stocks, bonds, and ETFs on your own. Personally, I do. But if you are not interested in or comfortable doing your own research, get some help! Included at the end of this article are SWFL Inc. members who can help you prepare for your financial future.
Cool Stuff I Like – And You Might, Too
- Acorns: This app tracks whenever you make a purchase, rounds up to the nearest dollar, and puts the round up into an investment account for you. I do not even “feel it” and yet my little account just keeps growing and growing.
- Seeking Alpha’s Wall Street Breakfast Podcast: You might not understand everything when you first start listening to this podcast, but you will be amazed how much you start to learn very quickly.
- Stocks for Beginners Podcast: Exactly what the name implies. Plus, the host is an Aussie with a great accent.
- Sofi’s Relay Tool: Sofi was essentially created to help millennials manage and eliminate student loan debt and has grown to offer all kinds of products, including IRAs. I use Sofi’s Relay to see all my accounts (investments, credit cards, loans, even real estate) in one place and assess my personal situation. Your bank might also offer a tool like this.
- Fundrise: Little guys like me do not have easy access to real estate investing. Fundrise is essentially the first company to successfully crowdfund real estate investing. This is not a place to start your journey, but something to check out if and when you are looking for more ideas.
About Marci Seamples
Seamples is the Director of Development at Naples Zoo and is grateful for and amazed by all the good things donors are able to do for themselves and others because someone along the way taught them the rules of the investment world. She is a Certified Fundraising Executive (CFRE) and a Chartered Advisor in Philanthropy (CAP). She is NOT a financial advisor and none of the above should be considered professional investment advice. See the following list of SWFL Inc. members who are financial professionals that can help you on your investment journey.