Retirement FAQs

How much should I invest for retirement?

As a general guideline, first we suggest paying off all debt (except your mortgage) and building an emergency fund with 3–6 months’ worth of living expenses. Then, invest 15% of your gross (not net) annual household income each year in tax-advantaged retirement accounts.

If your employer offers a match, that’s awesome, but it doesn’t count toward the 15%!

Which retirement account types should I use?

Depending on your situation, sometimes you may want to use more than one type! As a general guideline, we recommend using the following formula to help you figure out which accounts to use:

Match beats Roth beats Traditional.

If your employer offers a Roth 401(k) with a match of 4%, for example:

• You could invest all 15% in that plan up to the Roth 401(k) limit if you like the investment options you have there.
• If you reach the Roth 401(k) contribution limit before reaching 15% of your total income, you could invest the rest in a Roth IRA.
• If you’re not eligible for a Roth IRA, consider a traditional IRA.

Imagine your employer only offered a traditional 401(k) with a 4% match:

• You could invest 4% in that plan to take advantage of the match.
• Next, you could invest with a Roth IRA until you either hit 15% of your income or the contribution limit for your Roth IRA.
• If you reach your Roth IRA contribution limit before reaching 15% of your total income, you could go back to your traditional 401(k) and increase your contributions until you reach 15% of your gross income or the 401(k) contribution limit.
• If you meet all your contribution limits and still haven’t reached 15%, you could consider a brokerage account or talk to your investment professional about other options.

If you don’t have access to an employer-sponsored retirement account:

• There are now several retirement plan options for small-business owners or self-employed individuals, such as SEP-IRAs, SIMPLE IRAs and Solo 401(k)—all of which come with a Roth option.
• You could also make contributions into a separate Roth IRA if needed to hit 15%.

How do I open an investment account?

It depends on the type of account! For instance, if you want to set up an employer-sponsored account like a 401(k), your human resources (HR) department should be able to walk you through the process.

These days, you can also open an investment account on the website of any major brokerage. As a general rule, we recommend working with a financial advisor, who will be able to help you select and set up the right account for your needs.

What should I invest in?

We recommend investing evenly across four different categories of growth stock mutual funds:

• Growth and Income Funds (Large Cap): These funds provide slow and steady growth by investing in large companies that are generally much more stable than smaller companies.
• Growth Funds (Medium Cap): These funds invest in medium-sized companies, which creates potential for moderate growth and volatility. These funds are more likely to mirror the growth of the stock market.
• Aggressive Growth Funds (Small Cap): Also called emerging market funds, these funds are often the “wild child” of your portfolio. Usually invested in lots of startups with the potential for rapid growth, you could easily see big gains over one stretch of time and equally big losses in the next.
• International Funds: Made up of company stocks from around the world, international funds help you further diversify your money by investing outside of the U.S.

This content provides general investing education. Connect with an investment professional to dicuss a plan tailored to your unique situation.