How to Start a Retirement Fund at Any Life Stage

No matter your age, you can begin saving today.

Planning for the future is always smart, which means it's never too soon to start thinking about your retirement. If you aren't already set up with a plan for retirement, it can be difficult to know how to begin. Here's what to know about saving up for your post-career years no matter what stage you are in life.

Figure out how much you need to save.

The first step in setting up a retirement fund is figuring out your budget. If you know how much you can afford to invest every month, you'll get a better sense of how long it will take you to reach your retirement goal. "It's always difficult to find room in your budget for retirement savings. The single most important thing you can do is to automate, automate, automate your savings," says George Mannes, senior editor at AARP The Magazine. "Have your retirement savings automatically deducted from each paycheck or automatically debited from your bank account every month, so you don't have to make the decision every few weeks that you're going to save something for retirement. You just have to make the decision once. And if you don't see the money in your bank account, you won't miss it and you won't spend it."

Another part of budgeting is calculating how much you'll need in order to retire. Here, you can ask yourself some big questions: When is your target retirement date? (Age will play a factor here.) Will your living expenses and lifestyle remain the same after you retire? Do you plan to (or already have) a spouse and children who will depend on you financially? With these answers, you can calculate how much you should be putting away each month to live comfortably.

Another consideration is risk tolerance, which is how much variability you can afford to take on financially. This will come into play later, when you're choosing where to store your money whether it be a 401(k) or a brokerage account.

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Choose a retirement plan option.

Once you've got a sense of how much you need to start putting toward retirement each month, now you have to choose what type of account you'll need. There are a few options out there for retirement: The first is a 401(k), which is a company-sponsored retirement account that you can contribute to during your employment. It's common for companies to match employee contributions up to a certain percentage and set it on a vesting schedule.

Next, there's a traditional IRA. This is an individual retirement arrangement that you can contribute your pre-tax income up to $6,000 ($7,000 for those 50 and older) where the funds can grow tax-deferred until withdrawn. Similar to a traditional IRA is the Roth IRA, which is a retirement account where you can contribute income up to $6,000 ($7,000 for those 50 and older), but this account is different because it's funded with after-tax dollars.

Last but not least, you could open a brokerage account. This is an investing account where you can buy and sell stocks, bonds, and mutual funds as another way to earn money to put toward retirement.

Start investing and contributing.

Luckily, you aren't limited to one of the options mentioned above—you can choose to both contribute to a 401(k) and also open a brokerage account, for example. If you choose to try your hand at investing through a brokerage account, you should figure out if you want to be an active or passive investor. Passive investing is when you take a set-it-and-forget approach when buying securities and is geared toward-long-term gains. However, you should still revisit your portfolio every six to 12 months. This tends to be a safer option with less volatility.

Active investing takes a more hands-on approach, where you'd need to keep a closer eye on the market, and buy and sell assets more frequently. This is a more volatile strategy with a higher risk of monetary loss. Examples of active investing include day traders and swing traders.

This is where risk tolerance comes in. There are generally three types of risk tolerance: aggressive moderate, and conservative. Passive investing is generally recommended, especially if you're older and working toward retirement. In general, there's a good rule of thumb when it comes to investing: if you buy an asset, you should always assume that you won't get your money back. "Study after study has shown that even professionals who spend 40 hours a week trying to beat the market are more likely to fail than succeed over the long run. Picking stock is not for amateurs, especially when your retirement is at stake," says Mannes. "The best thing to do is the safest and most boring: Invest in broad-market index funds like a balanced fund, which invests in both stocks and bonds. Or [you can go with] a target-date retirement fund, which is designed for people who plan to retire around a given year and which is automatically adjusted to become more conservative as that year approaches."

Making moves to set yourself up for a comfortable retirement can seem daunting, and there's so much more to know what we've covered. So it's always good to hire a financial advisor or certified financial planner to help you out. For now, these are the big three things you can do to get started preparing for retirement, no matter what your age. "And remember that every little bit [you can contribute] helps," says Mannes. "Just as it's never too early to start saving for retirement, it's never too late, either."

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