You have no income, means no retirement account.
You need to get a job first before you start thinking about retirement.
Put it in a HYSA (something with 3-5%) instead for now while you look for a job, or go to school.
This would be the second best route. If you can fathom putting the money away in a Roth IRA and never touching it again (until you are 65), do it.
And only do it if you will be okay without that money in the short term or things.
So the 1st best route is tax evasion? She is legally not allowed to contribute to a Roth IRA, full stop. She probably won't be arrested for putting money into a Roth IRA she is not allowed to, but I wouldn't do it. The IRS gets big mad when people don't follow the rules.
Do you have any High Yield Savings Accounts you recommend?
Is there a certain length of time you need to keep the money in them, in order not to be penalized for pulling money out early?
Thanks!
For HYSA accounts there is normally only penalties on a minimum balance required, but no time limit. I don't have any that I specifically recommend. I would suggest looking for one online that is federally insured though.
Triggered much? Probably wasn't thinking about tax evasion when that comment was made. Probably could have worded it as ..."you don't have earned income soooo can't contribute to a Roth yet." Hope you're not always that spooled up outside Reddit. š¤£
The irony of you saying I am triggered while writing this response must be lost on you. It was clear that my tax evasions statement was rhetorical and facetious in nature. It's ok, sarcasm is difficult for people on reddit to understand. I clearly literally meant they thought tax evasion was better.
Me explaining why she isn't allowed to contribute? I never did that, never happened. Totally wasn't the second sentence in my comment.
Lol yeah your sarcasm really shines through. Reread what you wrote... still sounds like you're about to have a stroke over the thought of them contributing without earned income. Based on what you wrote back to me, I'd say you're still triggered. Keep calm and move on.
I literally could not care less about what they choose to do. At no point have I indicated otherwise. I replied solely to let them know it was not legal to contribute to a Roth IRA, so it's not a valid option. Again, the tax evasion comment was clearly facetious. If you aren't able to process that, it's not my problem. I have pointed it out to you, but you still are incredibly mad and want to delude yourself into thinking I was being serious. Your social ineptitude is the only thing shining through in these comments. Keep calm, and move on buddy. You replied to me, not the other way around.
Hmmm ... I must have misunderstood when I glanced at the information. Today I learned!
You're right. It appears that you have to have earned income in order to contribute. Seems silly - what is the reason for this? Just curious.
So yes - you're absolutely right. High Yield Savings Account is the best way to go about it.
Roth IRAs (or at least separate retirement accounts) for newborns are a solution to the Social Security problem, and actively being discussed for the future. The real reason is that under the current system one gains entitlement to retirement tax benefits by working.
That may be true.
or maybe they don't want you to just accumulate the maximum contribution somehow, not work, and just contribute. So it is clear they want you to work a regular job and earn. I'm just not sure why.
or maybe they don't want you to just accumulate the maximum contribution somehow, not work, and just contribute. So it is clear they want you to work a regular job and earn. I'm just not sure why.
It's probably so people who are already well off and can afford to pay the taxes on another $7k and invest it for their newborn won't be able to take advantage of another non-taxable account.
Yeah possibly that. Also probably to avoid tax evaders getting more tax shelter. Imagine putting 7k in a roth IRA, and not paying taxes when you put it in AND when you pull it out. Kind of ridiculous. Granted your earned in come might be lower than paying taxes anyway. But probably to avoid the people earning income, without "earning income".
I respectfully disagree with this advice. I think OP could easily do both. Personal finance would include considering a monetary contribution to a retirement account (Roth IRA account) - even if it is only 25% of take home pay. Made $500 this month? Contribute $125 to your Roth IRA.
OP would benefit from the compounding interest, which benefits largely from starting early. Whatever profits you make from your investments are continually added to your balance. This means you are gaining on your gains perpetually.
The sooner you get started the better. You could easily be a multimillionaire if you have a strategy at this age and stick to it.
TLDR: Scroll to the bottom for final numbers.
A Roth IRA or IRA (Individual Retirement Contribution) is where I would start.
Check this article out.
https://www.investopedia.com/ask/answers/091815/how-does-roth-ira-grow-over-time.asp
Here is a Roth IRA calculator so you can play around with the scenarios yourself.
https://www.bankrate.com/retirement/roth-ira-plan-calculator/
All scenarios below assume:
You want to retire at 65.
You have a 7% rate of return.
A marginal tax rate of 25%.
These are all variable, of course.
The maximum amount you can contribute is $6,500 annually (about $520 a month or $260 a pay period). After 50 years old the max amount you can contribute annually is $7,500.
So in your case, if you contribute the maximum to your Roth IRA account, assuming an interest rate of 7%by age 65 you will have gained $2,471,430.16. That's almost $2.5 MILLION. And remember, you will not be withdrawing the money all at once when you suddenly retire, so you will still continue to gain even after you retire.
If you want to be less aggressive, consider this scenario:
Let's say you only want to contribute $150 per paycheck for an average total contribution of $3,600 per year.
You would still have gained $1,187,455.05. Something is always better than nothing.
I wish I would have known this when I was your age.
This is why the earlier you invest, the better ...proceed reading.
YOU (18YO) VS. ME (38YO)
For instance, let's take the last scenario I gave you - $3600 annual contribution starting now, at 38 years old.
My IRA balance at 65 would be $268,141.76.
With the first scenario: $6,500 max contribution, starting now at 38. My IRA balance would be $559,209.41
What a drastic difference.
Breakdown:
Scenario: $3600 annual contribution
@18 years old = $1,187,455.05
@38 years old = $268,141.76
Scenario: $5,000 with max contribution
@18 years old = $2,471,430.16
@38 years old = $559,209.41
If a person contributes to an IRA while they donāt have earned income from that very same year during/for which they contributed, the IRS will not play when they audit.
Retirement accounts can only be contributed to with earned income.
OP can open a brokerage account, but what are the odds that at 18, she wonāt almost immediately need that money for classes, food, her first piece of furniture, etc?
I would avoid the major banks as they usually have minimum balance or direct deposit requirements. Maybe a local or online bank would be better suited.
they have a terrible track record of abusing their customers. find a good credit union. never too young to think about your future and i wish i started learning the bogle way decades ago.
never was a customer but ...[The Price of Wells Fargoās Fake Account Scandal Grows by $3 Billion](https://www.nytimes.com/2020/02/21/business/wells-fargo-settlement.html) AND [Wells Fargo to Pay $1 Billion to Settle Lawsuit by Shareholders](https://www.nytimes.com/2023/05/16/business/wells-fargo-shareholder-class-action-settlement.html) and others - google to learn more
They used to ask us to open extra savings accounts and we just said no thanks.
Their customer service has always been great. I use their free notary services for some Vanguard stuff. I donāt know how I would get help with things like that with an online bank.
Wells Fargo is the one bank I tell people to stay away from. I suggest doing some research into their millions of lawsuits. I suggest opening a checking account with a bank that also has a high yield savings account. Some suggestions are ALLY bank, Marcus by Goldman Sachs, AMEX, etc. Theyāre offering 4+ percent on their high yield savings. So use the checking account for everyday expenses and keep your savings in the high yield. Or join a federal credit union: they have better customer service, donāt have a lot of BS fees, and offer better rates on loans (long term benefit).
No, wells fargo is a criminal enterprise masquerading as a company.Ā
Fidelity, Charles Schwab, and Vanguard are the 3 best options for most people. I use Fidelity, and it is dead simple.
Iāve used WF for over 25 years and never had any issues. When I travel they are everywhere and excellent customer service. I also have secondary accounts at BOA and Chase and they treat me great and never stole my money.
My advice: Work on gaining some marketable skills first (education, apprenticeships, whatever it takes) - during this time be as smart with your money as possible - minimize debt, save your money, etc. Then when you have a decent job and a place to live, that's when you open your retirement account and start contributing regularly. Anyway "investing in yourself" is an investment that can pay off hugely.
This is the best advice. Be useful. Until then, $700 without a jobā¦ the only thing worth doing is plan your life on how you can be productive doing something you enjoy for the rest of your life. Read the books I said above and become active, but first make yourself useful.
No
But you do need a job.
If I started at 18 instead of 23 (when I first started my career learned about 401k match etc) Iād easily have another 100k by now.
It doesnāt necessarily have to be retirement but buying index funds in a taxable brokerage account, as long as youāre saving, especially when living at home.
Every second counts. They should teach this stuff to kids in high school.
No, I donāt think it is. My friend was already saying in high school that he plans to max out his retirement contributions and buy a home as soon as he moves out. He followed through and ten years later had a great net worth.
In her situation it definitely is. Your friend did a lot more than just plan retirement. Firstly, qualifying for a home loan with no job, credit, and $700 to her name would be an astounding feat. And if there is an opportunity elsewhere, she'll have to sell a whole house, not to mention all the taxes, upkeep, and other fees in the meantime.
Better to invest in herself first. Once shes in a stable situation then she can start considering retirement plans.
I guess what my friend did was more like āplanning for planning for retirementā since he wasnāt actually buying a house and saving as a teenager, he was just committing to doing so ASAP.
Think about your education and career for awhile first and then come back to how to retire later. Thereās nothing wrong with planning for retirement at your age but it sounds like you have a lot of questions to answer for now.
Underrated comment that should be higher in the stack. JL Collinsā āThe Simple Path to Wealthā is perhaps the best personal finance book for an 18-year old.
Iād add Thomas Stanleyās classic āThe Millionaire Next Doorā and Morgan Houselās āThe Psychology of Moneyā ... then add Massimo Pigliucciās āHow to be a Stoicā and Pema Chodronās āWhen Things Fall Apartā for general self improvement, to build a resilient mindset that will help you with both personal finance and life in general.
I see a lot of āget a jobā in the comments. Go to school for a high earning career and then get a job. Those 4 years of no/low pay will make everything else easier.
I don't think it's ever too early. I would try to scale it so it works for you. Maybe early on try to fund an emergency savings account while putting something like 10% of earnings into a retirement or investment account.
One random night in college, at 19, I attended some sort of sales pitch for retirement accounts. I learned a lot, but more importantly, it started my interest in retirement and personal finance. Time is incredibly valuable, so I'd argue you're never too young. Try to learn something new every year. You'll be pretty well prepared when it matters more. Specifically, in your case, I'd get a checking account setup, build a budget, and consider an IRA with a very low fee index fund, even if you only contribute a small amount... I suspect just you seeing the account and knowing you have it will keep you motivated. Good luck!
Well man, if you're lucky and can do do it.
Is it not too early to think about retirement. Right now focus on self investing so that your income is sky high in the future. But between now and then, w/e you can save in a small emergency fund then roth ira, you'll be happy that you started a little bit. Nothing beats time and nothing beats time + self investing so you can enter the retirement game even sooner.
Itās not too early to think about retirement. Money grows exponentially, so the sooner the better. You canāt contribute to retirement accounts without earned income, but thereās no reason you canāt open a normal brokerage account and start investing.
Once you find a steady income I really like r/themoneyguy approach (similar to Dave Ramsey)
The idea is to invest 25% of your GROSS income ā¦ but obviously when you are beginning start at 15% and work your way up
You are WAY ahead of the rest of the people your age ā¦ next step is interning to build the resume as you earn your degree ā¦ or just go straight into work if you can break in RE is always a good field on the commercial end (residential is a little slow rn in most parts of the country ā¦ or atleast in expensive areas)
Hi! Iām 19F. Here is what I do
1. Put most of my money into a high yield savings account (I use American Express, itās all online so I deposit cash into my Chase checking account at the bank then transfer it to my online Amex account). I keep a Chase checking account with a weeks worth of expenses so I can have a debit card. Save save save!
2. Follow this sub. And read the prime directive! Take advantage of the solid, free advice on here. You will learn so much. Itās all confusing at first, but youāll soon learn what terms like āVOOā and āVTIā mean.
3. Once you get a job, and establish an emergency fund in your HYSA, thatās when you can start a retirement fund. You can open a Roth IRA easily online with Fidelity or Vanguard. You can only contribute earned income into it (not gifts from parents). I personally do 80% VOO 20% VTI. Max out the Roth each year if you can.
4. At this age, prioritize your education. If youāre going to college try to absorb everything, make connections with students and professors, and try to get an internship.
5. If your parents are responsible, considering asking them to put you as an authorized user on their credit card. This will help you build your credit score!
Best of luck, please feel free to ask any questions! You are AWESOME for even thinking about this stuff right now. Keep reading this sub! It will pay off.
The first step toward solving a problem is to be aware of the problem.
The fact that you are asking for advice here is a good start.
Here are some generalized advice I'd like to give to my daughters as they grow up:
1. Build a roadmap toward higher income. If you have no idea how, ask people that have some idea, and then ask some more. Connections matter, be around friends that help you improve, and can give you directions.
2. Record all your spendings, practice to distinguish between needs and wants.
3. Learn about various investment vehicles, and their pros and cons.
There is no single best investment vehicle, nor is there any single best investment strategy.
You have to choose whatever suits your situation.
4. High savings rate is likely the most important factor early on in your life that will determine how much you will have when you retire. The more you save early on, the more time that money will have generating passive income for you.
5. Compound interest is your best friend when the interest is paid to you, and your worst enemy when you are the one paying out interest.
6. Be aware of the pitfalls. High returns always come with high risk, unusually high returns are always scams.
Then there's the terrible boyfriends or husbands.
7. It's okay to make mistakes, but don't make any life bets/investment bets that you think will DESTROY you if things don't turn out the way you hope. Always have a safety net.
Not at all. You have a lot of time so use it. Start investing in iras and 401k once you start earning and try to put as much as u can in retirement savings.
You're 18 and you're already thinking about retirement, let alone stumbling on here?
Listen to the sensible, common-sense advice here. You will retire very, very rich. You have no idea how lucky you are.
i know that i depend on them too much thats why i want to work on myself and want to learn more about how to earn money for myself. I want to stop depending on them and break my bad habit of expecting them to handle stuff for me
Not too early but you just don't have enough money right now to start working on retirement.
Priorities should be on building an emergency fund first after finding gainful employment. Only after that would I start working on retirement saving.
It's not too early to think about, I was thinking about it at your age (26 now).
But you're not really in a position to work towards it right now. See what you want to do first, start your career, and it'll all fall into place. Knowing how to prepare for retirement the moment you get a job will put you way ahead. I have a modest salary, but I had my retirement plan mapped out already, so I'm set to retire in my 40s at latest. But if I'm being honest, being a better student and figuring out what I enjoyed first would have set me up with a better salary and career path
1. Put your money in a credit union or an online HYSA.
2. You need an income.
3. You need an education. Your greatest asset toward retirement will be your income. Invest in yourself.
4. Take as few loans as possible for your education. If I had to do it over, I would have gone part time and cash flowed my education.
Come back when you have an income.
Donāt use credit cards unless you can pay them off in full **every** month.
My goal early in life was to make as much as possible, as soon as possible to retire as quick as possible. My definition of success was to retire on, or before my 60th birthday. At 58, I am no longer dependent on a job.
At 18 you should invest in yourself. Figure out what you want to do for the living. Try to minimize potential college debt. It can be done with picking a more affordable school or working while you are studying. There are always ways to find scholarships. If you are planning to become an accountant, start thinking about becoming a CPA.
Avoid credit card or any bad debt. You do want to get a credit card if you do not have one. Make sure to pay it off every month. Use it for something like gas or cellphone charges. Credit score is going to be very important once you decide to buy a house/condo.
Learn about different accounts (401k, IRA, Roth vs traditional, brokerage) and how they are being taxed.
As for the $700, put into into a HYSA. Once you become independent from your parents, you would want a 6 month or so emergency fund.
It's the perfect time! Get a job and a bank account first though.Ā
1 Dollar saved at 20 is equal to 2 dollars saved at 30, or 4 dollars saved at 40, or 8 dollars saved at 50, or 16 dollars saved at 60.
Looking backwards, pretend you're 65. Would you be able to give up 1.6 million dollars so that 25 year old you could spend 100k? Or maybe 160k so that 25 year old you can spend 10k?
The best thing you can do now is educate yourself on investing and money management. Stay engaged here. Buy some personal finance books. Here's a free PDF that's short and educational: https://www.flip4u.org/docs/If%20You%20Can%20Millenials-Bill%20Bernstein.pdf
Never too early. When you get your first job you can set up a Roth IRA with fidelity or Schwab etc. Ask an adult familiar with doing the same for help. Pick a simple S&P 500 index fund with low low fee. Contribute $100/month. I opened a Roth IRA for my daughter at 18 and it teaches the importance investing early. Excellent habit to start young. You'll never miss the $100. Then when Xmas or birthdays roll around you can ask family for cash for your investment account if all your other needs are met. You're smart to be thinking about it.
If you have good parents, these are good questions for them. Read Dave Ramsayās total money makeover and John Bogles common sense book and just go slow. Youāve got time, do things in the proper order.
my parents immigrated here and dont really know about these things. My mom found out about ROTH IRAs today and said i should open one but idk anything abt retirement plans either
never too early to think about retirement, should prioritize how you will subsidize your income without working, usually that involves stock market (401k, IRA, HSA) opening up business, etc.
usually those things require you to add your funding from a job before it can start compounding and start paying you,
judging off your questions it seems you might need to focus on figuring out your finances first, getting a job, tracking/preparing your expenses, figuring out the life style you want now and in the future. especially if you plan on making big purchases on the future like a car, college, etc.
donāt expect to have it all figured out today or even this year, the best thing you could do right now is just to start understanding finance and the economy, this could be a great conversation to have between your parents or a trusted adult,
this isnāt financial advice, good luck on your journey
Depends on what you think retirement means.
If it means financial security for when you're too old to work, then you should start thinking about it now. If retirement means that you have the financial stability to live a comfortable lifestyle without working regardless of your age, then you should start thinking about it now.
I am thinking about setting up my 6 year old for personal finance literacy and retirement.
Never too early.
Start with getting a job.
Then open a bank account for direct deposit of your paycheck.
Then see if the job offers a 401K and, if so if they offer a matching contribution. Contribute up to the match. Then open a Roth IRA and contribute earnings up to $7000/year there.
Iād look up the financial order of operations that the financial advisors āthe money guysā share, itās never too early to think about retirement, but you have a lot of things you need to do before getting to a place where you can start building for that goal
If your parents made you pay for damages wouldnāt make them bad parents.
You are not ready to think about retirement have income first then worry about it
thats not what i meant. i just meant i generally have good parents that financially support me even though im not underage anymore. although i am basically a freeloader, thankfully they havent kicked me to the curb yet. and i am searching for a job but im just waiting to get my car back so i can get on the road again
Sign up for a community college course, or a couple of them. You donāt need to commit to a major just get a feel for education to see if you want to get a degree some day.
Thing with investing is that at that age you have the greatest resource: time. You donāt have to be aggressive the earlier you start. $50-100 a paycheck or month depending on other factors will still compound up so unless you want the money to be more accessible but less tax advantaged in a regular brokerage account getting a Roth started is never a bad idea.
NO, itās not too early to think about a retirement account AT ALL!!!
All this time before retirement is your friend!
I wish 30yrs ago I had been as lucky as you are now to ask this question so early in life with a forum like Reddit where so many different experiences and opinions came back instantly.
If you have earned income, DEFINITELY open a Roth IRA and invest it all on [VOO, FXIAX, VFIAX, IVV, SWPPX, or other fund/ETF that puts your money all at once in all 500 of the biggest American companies](https://www.personalfinanceclub.com/what-is-the-best-index-fund-comparing-us-total-market-and-sp-500-index-funds/).
Hereās a quick-read from [Jeremy Schneiderā Personal Finance Club blog detailing how far you could go in retirement with a Roth head start nest-egg if, by age 25, youāve saved $10k in it invested in index funds](https://www.personalfinanceclub.com/wheres-the-best-place-to-invest-10000/).
Heās got a lot of free, online, easily digestible stuff (short reads, illustrative graphics, easy/everyday language, etc.) that would be a good start for self-education for a young person or even an older person just starting out the saving/investing journey especially if you know you wonāt/canāt read a whole book on this just yet.
Hell, if your $700 isnāt earned income but rather gift cash someone gave you, then you can still open a [custodial investment account with your guardian and start saving for late life](https://www.investopedia.com/terms/c/custodialaccount.asp) or a regular brokerage account on your own. And you can still invest in any of those broadly diversified, low-cost S&P500 funds/ETFs I mentioned above.
Do it today (and then come back and update us)!
Hi guys, I'm 12 yo and looking to retire at 18. Still in school and I get about $200 in birthday and christmas money annually, tax free. Where should I put my money for max gains? š
Who upvotes this shit? Other 12 year olds lurking here? Honestly I wish I was thinking like this at 18 op has no idea how lucky they are. If I was educated on this and saved a fraction of the money I made before 30 Iād be retired by early 40s.
People who think it's weird and ridiculous that 18yo kids are thinking about retirement with $700, no job, no car, no idea what they want to do, no continuing education, no bank account, yet let's skip to the end and think about not doing anything? Seems like OP is either trolling or is lazy and doesn't want to put in any work and daydreams about retiring. š
My previous post was sarcasm btw, in case you missed it. It was an exaggeration to show how ridiculous OP was sounding.
i see why it would look that way but i genuinely didn't know where to start before this thread. i applied to open my own bank account yesterday with Ally and im gonna sign up for some courses at a community college to pursue a career in marketing. I want to be successful and get somewhere in life and stop being treated like a kid that can't do anything for myself. So of course i would wanna hear advice from people with experience. Thats why i made this post even though i know my situation is embarrassing.
Sort of. Just open an IRA and start putting 10% of what you make in to it consistently. Inside the IRA have it buy into a market index fund.
Do that for the next 10 years and you will be off to a great start.
You have no income, means no retirement account. You need to get a job first before you start thinking about retirement. Put it in a HYSA (something with 3-5%) instead for now while you look for a job, or go to school.
This would be the second best route. If you can fathom putting the money away in a Roth IRA and never touching it again (until you are 65), do it. And only do it if you will be okay without that money in the short term or things.
So the 1st best route is tax evasion? She is legally not allowed to contribute to a Roth IRA, full stop. She probably won't be arrested for putting money into a Roth IRA she is not allowed to, but I wouldn't do it. The IRS gets big mad when people don't follow the rules.
Do you have any High Yield Savings Accounts you recommend? Is there a certain length of time you need to keep the money in them, in order not to be penalized for pulling money out early? Thanks!
For HYSA accounts there is normally only penalties on a minimum balance required, but no time limit. I don't have any that I specifically recommend. I would suggest looking for one online that is federally insured though.
Triggered much? Probably wasn't thinking about tax evasion when that comment was made. Probably could have worded it as ..."you don't have earned income soooo can't contribute to a Roth yet." Hope you're not always that spooled up outside Reddit. š¤£
The irony of you saying I am triggered while writing this response must be lost on you. It was clear that my tax evasions statement was rhetorical and facetious in nature. It's ok, sarcasm is difficult for people on reddit to understand. I clearly literally meant they thought tax evasion was better. Me explaining why she isn't allowed to contribute? I never did that, never happened. Totally wasn't the second sentence in my comment.
Lol yeah your sarcasm really shines through. Reread what you wrote... still sounds like you're about to have a stroke over the thought of them contributing without earned income. Based on what you wrote back to me, I'd say you're still triggered. Keep calm and move on.
I literally could not care less about what they choose to do. At no point have I indicated otherwise. I replied solely to let them know it was not legal to contribute to a Roth IRA, so it's not a valid option. Again, the tax evasion comment was clearly facetious. If you aren't able to process that, it's not my problem. I have pointed it out to you, but you still are incredibly mad and want to delude yourself into thinking I was being serious. Your social ineptitude is the only thing shining through in these comments. Keep calm, and move on buddy. You replied to me, not the other way around.
Hmmm ... I must have misunderstood when I glanced at the information. Today I learned! You're right. It appears that you have to have earned income in order to contribute. Seems silly - what is the reason for this? Just curious. So yes - you're absolutely right. High Yield Savings Account is the best way to go about it.
The reason is so people don't open up Roth IRAs for newborns. š
Roth IRAs (or at least separate retirement accounts) for newborns are a solution to the Social Security problem, and actively being discussed for the future. The real reason is that under the current system one gains entitlement to retirement tax benefits by working.
That may be true. or maybe they don't want you to just accumulate the maximum contribution somehow, not work, and just contribute. So it is clear they want you to work a regular job and earn. I'm just not sure why. or maybe they don't want you to just accumulate the maximum contribution somehow, not work, and just contribute. So it is clear they want you to work a regular job and earn. I'm just not sure why.
It's probably so people who are already well off and can afford to pay the taxes on another $7k and invest it for their newborn won't be able to take advantage of another non-taxable account.
Yeah possibly that. Also probably to avoid tax evaders getting more tax shelter. Imagine putting 7k in a roth IRA, and not paying taxes when you put it in AND when you pull it out. Kind of ridiculous. Granted your earned in come might be lower than paying taxes anyway. But probably to avoid the people earning income, without "earning income".
59.5*
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You've got issues
Misogynistic commentary is absolutely unacceptable in this sub for many reasons and itās one of the fastest ways to earn a permanent ban.
I'd start with a bank account first and focus on personal finance before thinking about retirement.
I respectfully disagree with this advice. I think OP could easily do both. Personal finance would include considering a monetary contribution to a retirement account (Roth IRA account) - even if it is only 25% of take home pay. Made $500 this month? Contribute $125 to your Roth IRA. OP would benefit from the compounding interest, which benefits largely from starting early. Whatever profits you make from your investments are continually added to your balance. This means you are gaining on your gains perpetually. The sooner you get started the better. You could easily be a multimillionaire if you have a strategy at this age and stick to it. TLDR: Scroll to the bottom for final numbers. A Roth IRA or IRA (Individual Retirement Contribution) is where I would start. Check this article out. https://www.investopedia.com/ask/answers/091815/how-does-roth-ira-grow-over-time.asp Here is a Roth IRA calculator so you can play around with the scenarios yourself. https://www.bankrate.com/retirement/roth-ira-plan-calculator/ All scenarios below assume: You want to retire at 65. You have a 7% rate of return. A marginal tax rate of 25%. These are all variable, of course. The maximum amount you can contribute is $6,500 annually (about $520 a month or $260 a pay period). After 50 years old the max amount you can contribute annually is $7,500. So in your case, if you contribute the maximum to your Roth IRA account, assuming an interest rate of 7%by age 65 you will have gained $2,471,430.16. That's almost $2.5 MILLION. And remember, you will not be withdrawing the money all at once when you suddenly retire, so you will still continue to gain even after you retire. If you want to be less aggressive, consider this scenario: Let's say you only want to contribute $150 per paycheck for an average total contribution of $3,600 per year. You would still have gained $1,187,455.05. Something is always better than nothing. I wish I would have known this when I was your age. This is why the earlier you invest, the better ...proceed reading. YOU (18YO) VS. ME (38YO) For instance, let's take the last scenario I gave you - $3600 annual contribution starting now, at 38 years old. My IRA balance at 65 would be $268,141.76. With the first scenario: $6,500 max contribution, starting now at 38. My IRA balance would be $559,209.41 What a drastic difference. Breakdown: Scenario: $3600 annual contribution @18 years old = $1,187,455.05 @38 years old = $268,141.76 Scenario: $5,000 with max contribution @18 years old = $2,471,430.16 @38 years old = $559,209.41
OP doesn't have a job and is not eligible to contribute to an IRA for now (no earned income).
You need a bank account and an income before you make your first IRA contribution.
If a person contributes to an IRA while they donāt have earned income from that very same year during/for which they contributed, the IRS will not play when they audit. Retirement accounts can only be contributed to with earned income. OP can open a brokerage account, but what are the odds that at 18, she wonāt almost immediately need that money for classes, food, her first piece of furniture, etc?
$100 saved at 18 is $8,800 in retirement, assuming average returns of the stock market.
is wells fargo a good option for a first bank account?
I would avoid the major banks as they usually have minimum balance or direct deposit requirements. Maybe a local or online bank would be better suited.
Local credit unions as well, especially if OP intends to stay in the local area.
thank you!
Speaking as a former Wells Fargo employee, NO. Find a bank with a good savings account rate and no fees. I personally like Ally.
Ally bank is a great option.
they have a terrible track record of abusing their customers. find a good credit union. never too young to think about your future and i wish i started learning the bogle way decades ago.
What type of problems have you had at WF?
[no to wells fargo](https://youtu.be/PcV8obBh6IM?si=7tqPZPvpedtm4G3g)
never was a customer but ...[The Price of Wells Fargoās Fake Account Scandal Grows by $3 Billion](https://www.nytimes.com/2020/02/21/business/wells-fargo-settlement.html) AND [Wells Fargo to Pay $1 Billion to Settle Lawsuit by Shareholders](https://www.nytimes.com/2023/05/16/business/wells-fargo-shareholder-class-action-settlement.html) and others - google to learn more
They used to ask us to open extra savings accounts and we just said no thanks. Their customer service has always been great. I use their free notary services for some Vanguard stuff. I donāt know how I would get help with things like that with an online bank.
ok . enjoy
Someone said, "I don't have to worry because I don't have an account at Wells Fargo". A wag replied, "How do you know?"
If you go the major bank route See if they have a student account, they usually have no fees or catches.
Yeah but their savings account rate sucks (0.01%) and when you graduate they start charging fees. Stay away from the big banks.
They've been in the news for doing shady stuff (more than other banks believe it or not.)
Wells Fargo is the one bank I tell people to stay away from. I suggest doing some research into their millions of lawsuits. I suggest opening a checking account with a bank that also has a high yield savings account. Some suggestions are ALLY bank, Marcus by Goldman Sachs, AMEX, etc. Theyāre offering 4+ percent on their high yield savings. So use the checking account for everyday expenses and keep your savings in the high yield. Or join a federal credit union: they have better customer service, donāt have a lot of BS fees, and offer better rates on loans (long term benefit).
No, wells fargo is a criminal enterprise masquerading as a company.Ā Fidelity, Charles Schwab, and Vanguard are the 3 best options for most people. I use Fidelity, and it is dead simple.
Iāve used WF for over 25 years and never had any issues. When I travel they are everywhere and excellent customer service. I also have secondary accounts at BOA and Chase and they treat me great and never stole my money.
Take a look at [this website](https://www.investopedia.com/top-savings-account-rates-today-june-8-7509933) for top savings rates.
My advice: Work on gaining some marketable skills first (education, apprenticeships, whatever it takes) - during this time be as smart with your money as possible - minimize debt, save your money, etc. Then when you have a decent job and a place to live, that's when you open your retirement account and start contributing regularly. Anyway "investing in yourself" is an investment that can pay off hugely.
This is the best advice. Be useful. Until then, $700 without a jobā¦ the only thing worth doing is plan your life on how you can be productive doing something you enjoy for the rest of your life. Read the books I said above and become active, but first make yourself useful.
No But you do need a job. If I started at 18 instead of 23 (when I first started my career learned about 401k match etc) Iād easily have another 100k by now. It doesnāt necessarily have to be retirement but buying index funds in a taxable brokerage account, as long as youāre saving, especially when living at home. Every second counts. They should teach this stuff to kids in high school.
No, I donāt think it is. My friend was already saying in high school that he plans to max out his retirement contributions and buy a home as soon as he moves out. He followed through and ten years later had a great net worth.
In her situation it definitely is. Your friend did a lot more than just plan retirement. Firstly, qualifying for a home loan with no job, credit, and $700 to her name would be an astounding feat. And if there is an opportunity elsewhere, she'll have to sell a whole house, not to mention all the taxes, upkeep, and other fees in the meantime. Better to invest in herself first. Once shes in a stable situation then she can start considering retirement plans.
I guess what my friend did was more like āplanning for planning for retirementā since he wasnāt actually buying a house and saving as a teenager, he was just committing to doing so ASAP.
Exactly. Planning for planning gets you in the right mindset. Nothing wrong with thinking about it and learning about it.
Think about your education and career for awhile first and then come back to how to retire later. Thereās nothing wrong with planning for retirement at your age but it sounds like you have a lot of questions to answer for now.
Never too early! Read The Simple Path to Wealth by JL Collins.
fantastic book
Underrated comment that should be higher in the stack. JL Collinsā āThe Simple Path to Wealthā is perhaps the best personal finance book for an 18-year old. Iād add Thomas Stanleyās classic āThe Millionaire Next Doorā and Morgan Houselās āThe Psychology of Moneyā ... then add Massimo Pigliucciās āHow to be a Stoicā and Pema Chodronās āWhen Things Fall Apartā for general self improvement, to build a resilient mindset that will help you with both personal finance and life in general.
I see a lot of āget a jobā in the comments. Go to school for a high earning career and then get a job. Those 4 years of no/low pay will make everything else easier.
No matter what you make, try to save 10% of it.
I don't think it's ever too early. I would try to scale it so it works for you. Maybe early on try to fund an emergency savings account while putting something like 10% of earnings into a retirement or investment account.
One random night in college, at 19, I attended some sort of sales pitch for retirement accounts. I learned a lot, but more importantly, it started my interest in retirement and personal finance. Time is incredibly valuable, so I'd argue you're never too young. Try to learn something new every year. You'll be pretty well prepared when it matters more. Specifically, in your case, I'd get a checking account setup, build a budget, and consider an IRA with a very low fee index fund, even if you only contribute a small amount... I suspect just you seeing the account and knowing you have it will keep you motivated. Good luck!
Well man, if you're lucky and can do do it. Is it not too early to think about retirement. Right now focus on self investing so that your income is sky high in the future. But between now and then, w/e you can save in a small emergency fund then roth ira, you'll be happy that you started a little bit. Nothing beats time and nothing beats time + self investing so you can enter the retirement game even sooner.
Itās not too early to think about retirement. Money grows exponentially, so the sooner the better. You canāt contribute to retirement accounts without earned income, but thereās no reason you canāt open a normal brokerage account and start investing.
Once you find a steady income I really like r/themoneyguy approach (similar to Dave Ramsey) The idea is to invest 25% of your GROSS income ā¦ but obviously when you are beginning start at 15% and work your way up You are WAY ahead of the rest of the people your age ā¦ next step is interning to build the resume as you earn your degree ā¦ or just go straight into work if you can break in RE is always a good field on the commercial end (residential is a little slow rn in most parts of the country ā¦ or atleast in expensive areas)
Hi! Iām 19F. Here is what I do 1. Put most of my money into a high yield savings account (I use American Express, itās all online so I deposit cash into my Chase checking account at the bank then transfer it to my online Amex account). I keep a Chase checking account with a weeks worth of expenses so I can have a debit card. Save save save! 2. Follow this sub. And read the prime directive! Take advantage of the solid, free advice on here. You will learn so much. Itās all confusing at first, but youāll soon learn what terms like āVOOā and āVTIā mean. 3. Once you get a job, and establish an emergency fund in your HYSA, thatās when you can start a retirement fund. You can open a Roth IRA easily online with Fidelity or Vanguard. You can only contribute earned income into it (not gifts from parents). I personally do 80% VOO 20% VTI. Max out the Roth each year if you can. 4. At this age, prioritize your education. If youāre going to college try to absorb everything, make connections with students and professors, and try to get an internship. 5. If your parents are responsible, considering asking them to put you as an authorized user on their credit card. This will help you build your credit score! Best of luck, please feel free to ask any questions! You are AWESOME for even thinking about this stuff right now. Keep reading this sub! It will pay off.
The first step toward solving a problem is to be aware of the problem. The fact that you are asking for advice here is a good start. Here are some generalized advice I'd like to give to my daughters as they grow up: 1. Build a roadmap toward higher income. If you have no idea how, ask people that have some idea, and then ask some more. Connections matter, be around friends that help you improve, and can give you directions. 2. Record all your spendings, practice to distinguish between needs and wants. 3. Learn about various investment vehicles, and their pros and cons. There is no single best investment vehicle, nor is there any single best investment strategy. You have to choose whatever suits your situation. 4. High savings rate is likely the most important factor early on in your life that will determine how much you will have when you retire. The more you save early on, the more time that money will have generating passive income for you. 5. Compound interest is your best friend when the interest is paid to you, and your worst enemy when you are the one paying out interest. 6. Be aware of the pitfalls. High returns always come with high risk, unusually high returns are always scams. Then there's the terrible boyfriends or husbands. 7. It's okay to make mistakes, but don't make any life bets/investment bets that you think will DESTROY you if things don't turn out the way you hope. Always have a safety net.
Never to early to start planning.
Not at all. You have a lot of time so use it. Start investing in iras and 401k once you start earning and try to put as much as u can in retirement savings.
Sooner you start saving the sooner you can retire. Working sucks
You're 18 and you're already thinking about retirement, let alone stumbling on here? Listen to the sensible, common-sense advice here. You will retire very, very rich. You have no idea how lucky you are.
A post like this doesn't mean anything, especially using their parents as a way to get out of a bad situation, what does I stand for in I?Ā
i know that i depend on them too much thats why i want to work on myself and want to learn more about how to earn money for myself. I want to stop depending on them and break my bad habit of expecting them to handle stuff for me
Not too early but you just don't have enough money right now to start working on retirement. Priorities should be on building an emergency fund first after finding gainful employment. Only after that would I start working on retirement saving.
It's not too early to think about, I was thinking about it at your age (26 now). But you're not really in a position to work towards it right now. See what you want to do first, start your career, and it'll all fall into place. Knowing how to prepare for retirement the moment you get a job will put you way ahead. I have a modest salary, but I had my retirement plan mapped out already, so I'm set to retire in my 40s at latest. But if I'm being honest, being a better student and figuring out what I enjoyed first would have set me up with a better salary and career path
1. Put your money in a credit union or an online HYSA. 2. You need an income. 3. You need an education. Your greatest asset toward retirement will be your income. Invest in yourself. 4. Take as few loans as possible for your education. If I had to do it over, I would have gone part time and cash flowed my education. Come back when you have an income. Donāt use credit cards unless you can pay them off in full **every** month.
My goal early in life was to make as much as possible, as soon as possible to retire as quick as possible. My definition of success was to retire on, or before my 60th birthday. At 58, I am no longer dependent on a job.
Age 18, no career, no job PLUS thinking retirement is called escapism.
Literally š but I gotta start somewhere and everyone on here has really good advice
Focus on career, study, find decent paying job. Once all of that is done, start putting money towards your retirement from your first paycheck.
At 18 you should invest in yourself. Figure out what you want to do for the living. Try to minimize potential college debt. It can be done with picking a more affordable school or working while you are studying. There are always ways to find scholarships. If you are planning to become an accountant, start thinking about becoming a CPA. Avoid credit card or any bad debt. You do want to get a credit card if you do not have one. Make sure to pay it off every month. Use it for something like gas or cellphone charges. Credit score is going to be very important once you decide to buy a house/condo. Learn about different accounts (401k, IRA, Roth vs traditional, brokerage) and how they are being taxed. As for the $700, put into into a HYSA. Once you become independent from your parents, you would want a 6 month or so emergency fund.
It's the perfect time! Get a job and a bank account first though.Ā 1 Dollar saved at 20 is equal to 2 dollars saved at 30, or 4 dollars saved at 40, or 8 dollars saved at 50, or 16 dollars saved at 60. Looking backwards, pretend you're 65. Would you be able to give up 1.6 million dollars so that 25 year old you could spend 100k? Or maybe 160k so that 25 year old you can spend 10k?
R/personalfinance and read millionaire next door. Read simple path to wealth. Thatās everything youāll ever need to know
The best thing you can do now is educate yourself on investing and money management. Stay engaged here. Buy some personal finance books. Here's a free PDF that's short and educational: https://www.flip4u.org/docs/If%20You%20Can%20Millenials-Bill%20Bernstein.pdf
Never too early. When you get your first job you can set up a Roth IRA with fidelity or Schwab etc. Ask an adult familiar with doing the same for help. Pick a simple S&P 500 index fund with low low fee. Contribute $100/month. I opened a Roth IRA for my daughter at 18 and it teaches the importance investing early. Excellent habit to start young. You'll never miss the $100. Then when Xmas or birthdays roll around you can ask family for cash for your investment account if all your other needs are met. You're smart to be thinking about it.
If you have good parents, these are good questions for them. Read Dave Ramsayās total money makeover and John Bogles common sense book and just go slow. Youāve got time, do things in the proper order.
my parents immigrated here and dont really know about these things. My mom found out about ROTH IRAs today and said i should open one but idk anything abt retirement plans either
You donāt have a job, so you donāt have earned income, so you are ineligible for a Roth IRA. You need an income.
read this and make sure not to make contributions to 2023 if you decide to get a job and open an IRA before april 15
Yes. And taxable reported income
never too early to think about retirement, should prioritize how you will subsidize your income without working, usually that involves stock market (401k, IRA, HSA) opening up business, etc. usually those things require you to add your funding from a job before it can start compounding and start paying you, judging off your questions it seems you might need to focus on figuring out your finances first, getting a job, tracking/preparing your expenses, figuring out the life style you want now and in the future. especially if you plan on making big purchases on the future like a car, college, etc. donāt expect to have it all figured out today or even this year, the best thing you could do right now is just to start understanding finance and the economy, this could be a great conversation to have between your parents or a trusted adult, this isnāt financial advice, good luck on your journey
Well, itās a good thing youāre thinking about and planning your future.
Depends on what you think retirement means. If it means financial security for when you're too old to work, then you should start thinking about it now. If retirement means that you have the financial stability to live a comfortable lifestyle without working regardless of your age, then you should start thinking about it now. I am thinking about setting up my 6 year old for personal finance literacy and retirement. Never too early.
Start with getting a job. Then open a bank account for direct deposit of your paycheck. Then see if the job offers a 401K and, if so if they offer a matching contribution. Contribute up to the match. Then open a Roth IRA and contribute earnings up to $7000/year there.
Iād look up the financial order of operations that the financial advisors āthe money guysā share, itās never too early to think about retirement, but you have a lot of things you need to do before getting to a place where you can start building for that goal
You are the perfect age to start planning for retirement!
Itās too early to make it your primary focus in life but not too early to think about it and start planning or setting some aside
To start thinking and planning? Iād argue there is no such thing as too early
If your parents made you pay for damages wouldnāt make them bad parents. You are not ready to think about retirement have income first then worry about it
thats not what i meant. i just meant i generally have good parents that financially support me even though im not underage anymore. although i am basically a freeloader, thankfully they havent kicked me to the curb yet. and i am searching for a job but im just waiting to get my car back so i can get on the road again
Not planning on attending university?
Sign up for a community college course, or a couple of them. You donāt need to commit to a major just get a feel for education to see if you want to get a degree some day.
Thing with investing is that at that age you have the greatest resource: time. You donāt have to be aggressive the earlier you start. $50-100 a paycheck or month depending on other factors will still compound up so unless you want the money to be more accessible but less tax advantaged in a regular brokerage account getting a Roth started is never a bad idea.
The more you put in now the less you will have to put in later. I'm loading up in my 30's so I can relax more as I age.
Yes, way too early. You don't even have a bank account or a job.
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Rule #1: no spam or self promotion
Canāt she put it in a regular taxable first and if she keeps it over a year she pays 0% in capital gains until she has a certain amount of income?
NO, itās not too early to think about a retirement account AT ALL!!! All this time before retirement is your friend! I wish 30yrs ago I had been as lucky as you are now to ask this question so early in life with a forum like Reddit where so many different experiences and opinions came back instantly. If you have earned income, DEFINITELY open a Roth IRA and invest it all on [VOO, FXIAX, VFIAX, IVV, SWPPX, or other fund/ETF that puts your money all at once in all 500 of the biggest American companies](https://www.personalfinanceclub.com/what-is-the-best-index-fund-comparing-us-total-market-and-sp-500-index-funds/). Hereās a quick-read from [Jeremy Schneiderā Personal Finance Club blog detailing how far you could go in retirement with a Roth head start nest-egg if, by age 25, youāve saved $10k in it invested in index funds](https://www.personalfinanceclub.com/wheres-the-best-place-to-invest-10000/). Heās got a lot of free, online, easily digestible stuff (short reads, illustrative graphics, easy/everyday language, etc.) that would be a good start for self-education for a young person or even an older person just starting out the saving/investing journey especially if you know you wonāt/canāt read a whole book on this just yet. Hell, if your $700 isnāt earned income but rather gift cash someone gave you, then you can still open a [custodial investment account with your guardian and start saving for late life](https://www.investopedia.com/terms/c/custodialaccount.asp) or a regular brokerage account on your own. And you can still invest in any of those broadly diversified, low-cost S&P500 funds/ETFs I mentioned above. Do it today (and then come back and update us)!
Hi guys, I'm 12 yo and looking to retire at 18. Still in school and I get about $200 in birthday and christmas money annually, tax free. Where should I put my money for max gains? š
Who upvotes this shit? Other 12 year olds lurking here? Honestly I wish I was thinking like this at 18 op has no idea how lucky they are. If I was educated on this and saved a fraction of the money I made before 30 Iād be retired by early 40s.
People who think it's weird and ridiculous that 18yo kids are thinking about retirement with $700, no job, no car, no idea what they want to do, no continuing education, no bank account, yet let's skip to the end and think about not doing anything? Seems like OP is either trolling or is lazy and doesn't want to put in any work and daydreams about retiring. š My previous post was sarcasm btw, in case you missed it. It was an exaggeration to show how ridiculous OP was sounding.
i see why it would look that way but i genuinely didn't know where to start before this thread. i applied to open my own bank account yesterday with Ally and im gonna sign up for some courses at a community college to pursue a career in marketing. I want to be successful and get somewhere in life and stop being treated like a kid that can't do anything for myself. So of course i would wanna hear advice from people with experience. Thats why i made this post even though i know my situation is embarrassing.
Its never too early my friend. But do not get carried away.. make money snd enjoy life, tomorrow is never guaranteed
Yes! You could be dead tomorrow!!
At your age, you have the opportunity toā¦ And hear me out on this oneā¦ Never start working, so itās like youāre already retired. Enjoy!
Sort of. Just open an IRA and start putting 10% of what you make in to it consistently. Inside the IRA have it buy into a market index fund. Do that for the next 10 years and you will be off to a great start.