# Retirement question. How does one retire? **URL:** \ **Category:** In My Humble Opinion\ **Created:** [February 22, 2024, 5:51pm UTC](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956 "2024-02-22T17:51:15Z")\ **Posts on this page:** 20\ **Page:** 4
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [February 23, 2024, 9:51pm UTC](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956/61 "2024-02-23T21:51:29Z")
In other words, a guaranteed 100% immediate return on your investment. It’s a no brainer as the kids say. ---
**Author:** ![Dag\_Otto](https://avatars.discourse-cdn.com/v4/letter/d/439d5e/32.png) [@Dag\_Otto](https://boards.straightdope.com/u/Dag_Otto)\ **Post date:** [February 23, 2024, 9:54pm UTC](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956/62 "2024-02-23T21:54:27Z")
Wow. A lot of good information here. But, even as someone who understands most everything that has been said, what a firehouse blast of information for the OP to digest. So a word to the OP - please don’t be disuaded by the apparent complexity. Yes, there are some intricacies to know about, but you don’t need to know about them right now. What you need to do right now is to start putting money away for retirement. Now. Today. As noted by others, there are two main options to have retirement accounts, either through work with a 401k, or individually with Individual Retirement Accounts (IRAs). Within these two options, there are options to have these accounts be tax deferred (commonly called Traditional accounts) or tax free (commonly called Roth accounts). You are not limited to one or the other, you can have each type, so don’t worry about making a less than optimal choice right now. You can fine tune later on. Consider the following if you are serious enough about this to save $14,000 in 2024. If you have any money in savings right now, that you can afford to invest in retirement, then open a Roth IRA for yourself, and one for your wife. You can do this just about anywhere, but the most commonly suggested places on retirement forums are Fidelity, Charles Schwab, or Vanguard. If you fund these accounts before April 15th, you can fund these as 2023 contributions (up to $6,500 per account, one for you and one for your wife). Then, you will be able to later fund the $14,000 as 2024 contributions throughout the rest of the year (and in case you are wondering, the 2023 limits are $6,500 per person, while they are $7000 per person in 2024). The entire point of the above is to take advantage of the fact that you can still make IRA contributions for 2023 (up until April 15th 2024), and then also max out your 2024 contributions. You are behind in retirement savings. If possible, do not miss making 2023 contributions. Open the Roth IRAs and fund as much of the 2023 contributions as you can, then follow by maxing out the 2024 contributions. Note: you don’t even have to pick any investment for these IRAs now, they will default to a money market fund making 3-5%. You can pick the investments later when you know more, just get the money in right now. Also, this is for money you have that you can afford to invest. If putting this money in an IRA means that you will not be able to pay bills, have a car repossessed, etc., then do not do this. ---
**Author:** ![Tired\_and\_Cranky](https://avatars.discourse-cdn.com/v4/letter/t/a87d85/32.png) [@Tired\_and\_Cranky](https://boards.straightdope.com/u/Tired_and_Cranky)\ **Post date:** [February 23, 2024, 10:28pm UTC](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956/63 "2024-02-23T22:28:39Z")
You’re 40 years old. There’s still time to save a enough for retirement to improve your quality of living. Sure, it would have been great to start 15 or so years ago but today’s a pretty good day to start too. I don’t know what happened to your friends and family and I doubt that they are telling an accurate story to you, either because they don’t know or don’t want to share the whole truth. All I can say is that I’m just a little bit older than you and I’ve been very happy to have invested in the stock market through low cost stock index mutual funds from Vanguard for over two decades now (starting when I was in college). I plan to keep investing in the same basic way for the foreseeable future because it works. Sometimes, like in 2001 and 2008, I lost a lot of money. But what that meant was that I had a rare opportunity to buy stocks much more cheaply than they would ever be again. Being a regular saver and investor has served me well. You can start with a Vanguard IRA for $3000. We’re happy to make some recommendations if you’re interested. Good luck. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [February 23, 2024, 10:45pm UTC](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956/64 "2024-02-23T22:45:49Z")
Have you ever heard of Warrren Buffett? He is one of the richest people in the world and a brilliant investor. And he has said that his instructions to the people who will manage his wife’s wealth is to invest ninety percent in a low-cost S&P500 index fund. So if you don’t want to overthink it, just do the same thing with the money that you set aside for retirement. And ignore any short term losses. ---
**Author:** ![Velocity](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/velocity/32/18006_2.png) [@Velocity](https://boards.straightdope.com/u/Velocity)\ **Post date:** [February 24, 2024, 12:34am UTC](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956/65 "2024-02-24T00:34:09Z")
I agree - everyone here in this thread is well-meaning but may have overwhelmed the OP. The simple version is this: Best time to plant a tree was 20 years ago, but the second-best time is now. So, OP - you missed out on the best time of your life to do so, which was your early 20s, but it’s still better to start at age 40 than at 55. If you start earnestly socking money away into a 401k and IRA right now, it _may_ still grow to, say, half a million dollars by retirement, which, if carefully milked, could yield you a (modest) income for your entirety of retirement, when paired with Social Security. It won’t be big bucks, but it’s still significantly better than nothing. ---
**Author:** ![Briny\_Deep](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/briny_deep/32/17188_2.png) [@Briny\_Deep](https://boards.straightdope.com/u/Briny_Deep)\ **Post date:** [February 24, 2024, 1:00am UTC](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956/66 "2024-02-24T01:00:51Z")
Want to chime in to say 40 is not too late. I was in bad shape at 40, and around that time started to seriously invest (and also earn more money) and now, close to retirement, I’m in OK shape. It can be done, starting now. Good luck, you’re on the right track. ---
**Author:** ![Munch](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/munch/32/5281_2.png) [@Munch](https://boards.straightdope.com/u/Munch)\ **Post date:** [February 24, 2024, 1:05am UTC](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956/67 "2024-02-24T01:05:35Z")
I sent a flag to the mods that I think this thread could use a good pause for the OP to digest everything, and for the rest of us to cease the firehose of minutia we’re bombarding him with. Everyone’s free to make their own comments of course - I’m not a mod. Just my opinion. ---
**Author:** ![ThelmaLou](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/thelmalou/32/390_2.png) [@ThelmaLou](https://boards.straightdope.com/u/ThelmaLou)\ **Post date:** [February 24, 2024, 1:13am UTC](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956/68 "2024-02-24T01:13:10Z")
> [@Velocity](#): > > I agree - everyone here in this thread is well-meaning but may have overwhelmed the OP. He can always go back and reread everything. Several times. It IS a lot, but it’s very good stuff. > [@Munch](#): > > Just my opinion. You know I love you, but I don’t think we need to protect the OP from himself or from us. He sounds like a sharp cookie who is eager to learn. If he feels overwhelmed, he can always take his own pause and come back later. Just _my_ opinion. I’ve learned a lot here, too. ---
**Author:** ![elbows](https://avatars.discourse-cdn.com/v4/letter/e/b3f665/32.png) [@elbows](https://boards.straightdope.com/u/elbows)\ **Post date:** [February 24, 2024, 1:37am UTC](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956/69 "2024-02-24T01:37:12Z")
The best approach when offered overwhelming info, in my experience, is to digest what you can, then do NOT hesitate to come back and ask again. It IS a lot, it IS complex. Keep asking, someone will hit the right note for you, and over time bits will start to make more sense. Don’t stop asking. As you can see you’ve found a more than willing source of chat if you need it. My experience has been that people here truly do love to help. ESPECIALLY when you’re out of your depth! The phrase, ‘I’m not really certain I understand this bit.’ Has proven invaluable to me, many times. Good Luck! ---
**Author:** ![robby](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/robby/32/11048_2.png) [@robby](https://boards.straightdope.com/u/robby)\ **Post date:** [February 24, 2024, 1:56am UTC](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956/70 "2024-02-24T01:56:28Z")
> [@Translucent\_Daydream](#): > > I’m originally from the south. I don’t know what people’s specific religions are, but essentially what I gathered from them is that the stock market is a form of gambling, and money coming from the proceeds of gambling is tainted, even if you use it for some good. They don’t play the Lotto. I don’t know what happens to a 401k when the stock market tanks, or the correlation between the two, but that is what killed my uncle’s retirement. He was retired for two years and had to go back to work. He is in his 70s as well. I asked him about it and all he would say is “the fucking stock market killed it” and fume and look off into the distance. I get no information from these guys. The stock market is not gambling. Gambling is when you bet on something in which the outcome is purely based on chance. When you invest in a company, you lend them money so that they can expand their business. This may or may not work out, but generally speaking, the company works to pay you back with interest. You can minimize your risk by investing in a diverse portfolio or mutual fund, which basically means you are investing a small amount in a large number of companies. Then there are mutual funds called index funds that mimic the entire stock market. Because the stock market as a whole generally rises over the long run, this is way to take small, steady investments and turn them into a large nest egg for retirement. However, because market sometimes tanks, it’s important to move your assets out of more risky (but potentially higher return) investments and into safer (but lower potential return) assets as you get closer to retirement. My 401(k) took a big hit a few years ago (summer 2022) but has since recovered all its value and is even higher than before the drop. If I had been close to retirement that might have been an issue, but since I wasn’t, it didn’t matter. Anyone who had to go back to work because of a drop in the market was not well-advised in their choice of investments, to say the least. ---
**Author:** ![Mighty\_Mouse](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mighty_mouse/32/7776_2.png) [@Mighty\_Mouse](https://boards.straightdope.com/u/Mighty_Mouse)\ **Post date:** [February 24, 2024, 1:57am UTC](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956/71 "2024-02-24T01:57:10Z")
As someone who should have quite a good handle on this stuff, I always learn a thing or two (or more) from the discussions here. ---
**Author:** ![Yllaria](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/yllaria/32/3452_2.png) [@Yllaria](https://boards.straightdope.com/u/Yllaria)\ **Post date:** [February 24, 2024, 6:25pm UTC](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956/72 "2024-02-24T18:25:02Z")
You may not want to bother with changing the types of funds you’re in as you get closer to retirement. If that seems like a chore, some financial houses have retirement-based mutual funds. They’re labeled as 20-year, 30-year, etc. The years are the years left until you retire. Those funds automatically shift to less risky holdings as the years pass. You don’t have to keep making changes to keep yourself safer as retirement gets closer. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [February 24, 2024, 8:15pm UTC](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956/73 "2024-02-24T20:15:46Z")
> [@Dinsdale](#): > > But I’ll suggest you may want to take it upon yourself to educate yourself and develop some good habits at this point. The folk around here are quite intelligent and well intentioned, but you might just want to kinda make it your hobby for the immediate future to improve your financial knowledge. There are any number of books/websites sich as “Investing for Dummies.” You don’t have to become an expert, but you DO need to build up a basic vocabulary and understanding of basic concepts. Look for free workshops at your local library or basic classes at a community college. This is good advice. Going to a financial advisor is a good idea, but unless the OP educates himself on the basics of finance and the market he will be unable to judge if he is getting directed the right way or being ripped off. > [@doreen](#): > > In 2022, literally just as I retired , I lost multiple thousands in my retirement account. I put my entire last paycheck into the account and still had less than I had a week earlier. Doesn’t happen with a savings account. No, you lost thousands on paper. Some months I lose a ton of money, some months I make a ton of money. None of it matters if your are not cashing out the investment, and the biggest mistake people make is to sell at the bottom during a crash. During the 2008 crash Dan Ariely said on Marketplace that the best investment strategy was to not open your monthly statement. It worked for me. I discovered that retirement is not about investment amounts, but cash flow. If your investments + Social Security produce enough income for you to live on, the balance of your portfolio is unimportant. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [February 24, 2024, 8:30pm UTC](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956/74 "2024-02-24T20:30:59Z")
> [@Yllaria](#): > > You may not want to bother with changing the types of funds you’re in as you get closer to retirement. If that seems like a chore, some financial houses have retirement-based mutual funds. They’re labeled as 20-year, 30-year, etc. The years are the years left until you retire. Those funds automatically shift to less risky holdings as the years pass. You don’t have to keep making changes to keep yourself safer as retirement gets closer. I think you’re thinking of “target date” funds. For example, if you’re 40 now, you might be thinking of retirement in 25 years, so the Fidelity Freedom Fund 2050 might be for you. It’s mostly in stock index funds now but as retirement approaches, more of the total shifts to bond index funds. ---
**Author:** ![Velocity](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/velocity/32/18006_2.png) [@Velocity](https://boards.straightdope.com/u/Velocity)\ **Post date:** [February 24, 2024, 8:36pm UTC](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956/75 "2024-02-24T20:36:43Z")
I have the Fidelity Freedom 2050. It’s worked decently for me so far (I chose it since I’d be 63 in the year 2050, so it seemed the thing to do) but now in hindsight I wonder if I should have played it more boldly and chosen the Freedom 2060 instead, which would have been a more aggressive approach. Which, of course, though, entails more risk. I intend to retire around age 60 no matter what, it’s just that I am aggressive by nature and sometimes think I played the Freedom Fund target date too safe by going by the book. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [February 24, 2024, 8:38pm UTC](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956/76 "2024-02-24T20:38:24Z")
Without checking, I’ll bet that both funds are pretty similar (in terms of asset allocation) this far out. So you could probably switch now without affecting anything. ---
**Author:** ![doreen](https://avatars.discourse-cdn.com/v4/letter/d/858c86/32.png) [@doreen](https://boards.straightdope.com/u/doreen)\ **Post date:** [February 24, 2024, 8:49pm UTC](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956/77 "2024-02-24T20:49:43Z")
I know my loss was only on paper but I was trying to explain why some people consider the stock market to be a form of gambling and that was just an example .It doesn’t matter to those people if the loss or gain is on paper only. ---
**Author:** ![SpoilerVirgin](https://avatars.discourse-cdn.com/v4/letter/s/4491bb/32.png) [@SpoilerVirgin](https://boards.straightdope.com/u/SpoilerVirgin)\ **Post date:** [February 24, 2024, 10:32pm UTC](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956/78 "2024-02-24T22:32:24Z")
Just a quick note: Fidelity has two different sets of Target Date Funds, the Fidelity Freedom Funds, which are managed funds with higher fees (.66 expense ratio for my year), and Fidelity Freedom Index Funds, which are index funds with very low fees (.12 expense ratio for my year). I was originally put into the managed fund by a Fidelity Advisor, but I eventually sold out of it and now have only the index fund. Make sure you choose the right version for you. ---
**Author:** ![Yllaria](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/yllaria/32/3452_2.png) [@Yllaria](https://boards.straightdope.com/u/Yllaria)\ **Post date:** [February 24, 2024, 10:57pm UTC](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956/79 "2024-02-24T22:57:49Z")
> [@Dewey\_Finn](#): > > I think you’re thinking of “target date” funds. That’s entirely possible. > [@Velocity](#): > > it’s just that I am aggressive by nature and I have to force myself to shift to less risky funds. I have too much comfort with risk. The fact that this has worked our well so far doesn’t help. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [February 24, 2024, 11:21pm UTC](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956/80 "2024-02-24T23:21:47Z")
> [@Translucent\_Daydream](#): > > Hello Carvaise. > > I’m originally from the south. I don’t know what people’s specific religions are, but essentially what I gathered from them is that the stock market is a form of gambling, and money coming from the proceeds of gambling is tainted, even if you use it for some good. They don’t play the Lotto. I don’t know what happens to a 401k when the stock market tanks, or the correlation between the two, but that is what killed my uncle’s retirement. He was retired for two years and had to go back to work. He is in his 70s as well. I asked him about it and all he would say is “the fucking stock market killed it” and fume and look off into the distance. I get no information from these guys. > > The company I work at has offices all over the country (and world) and there was a huge revolt of this forced garnishment. Some of the people here where I am were a part of it. HR kept telling me to talk to Fidelity about it, like they were running the garnishment program. Fidelity was the original company I met with in 2009 that told me that my income was insufficient to plan for retirement so naturally I got pretty ticked off that they were taking money out of my check and stood up with them. HR was really cagey about the whole thing and refusing to talk about it. A case study in the perils of ignorance and a belief in “woo”. Financial markets aren’t “gambling” per se, but they are a form of speculation, represented by “risk” and probability. In many ways, similar to gambling. A 401k represents a collection of “funds”. And those funds represent different combinations of securities such as stocks (equity) and/or bonds (debt). Debt is generally considered less risky than equity, but tends to show a lower return). Baskets of stocks or bonds are less risky than individual ones since they aren’t tied to the fortune of just one company. The market as a whole may go up and down in response to various events. But over time, the markets tend to go up: > **[S&P 500 Price, Real-time Quote & News - Google Finance](https://www.google.com/finance/quote/.INX:INDEXSP?sa=X&ved=2ahUKEwjplrjnjsWEAxWmLzQIHbY-AesQ3ecFegQIJBAX)** > > Get the latest S&P 500 (.INX) value, historical performance, charts, and other financial information to help you make more informed trading and investment decisions. For this reason, the best time to start saving for your retirement is “early”. I understand how people may want to avoid entering the stock market for various reasons - religious aversions to gambling which are probably based on real-world avoidance of risk and speculation, lack of understanding, lack of trust in financial institutions, etc. The problem is that simply storing your money away in a mattress or savings account will cause it to lose value over time due to inflation. Also it’s not “garnishment”. It never stops being your money. I use Fidelity. You can just log into your account online and change your contributions to “zero” if you like at any time. [Previous page](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956.md?page=3) [Next page](https://boards.straightdope.com/t/retirement-question-how-does-one-retire/997956.md?page=5)