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A lot of folks, from Dave’s fans to his critics—maybe even you —are tempted to write off his retirement saving advice. After all, what could a successful business-owner like Dave know about saving for retirement on your income, right?
But before you decide his advice won’t work for you, remember that, at one point, Dave was beyond broke. He was millions of dollars in debt and was eventually forced to declare bankruptcy. He had to completely start over financially, and, just like you, he needed a way to build wealth for the future. This time around, he was determined to build his nest egg on a secure foundation of debt-free living and simple, conservative investing.
That was a long time ago—long enough for Dave and anyone else who’s followed his retirement investing advice to know it really does work. If you’re looking for a simple retirement plan that gets results, then keep reading to find out how to make Dave’s retirement investing advice part of your financial plan.
1. Invest 15% for Retirement
Your first step is to carve out 15% of your income just for retirement investing. Why 15%? It’s enough to allow you to reach your retirement savings goals, but not too much to keep you from enjoying your income today. Your 15% is based on your gross income and does not include any matching funds you receive through your employer’s retirement plan.
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It’s okay to work your way up to that 15% goal—not everyone can make such a large budget adjustment overnight. But don’t drag it out forever. The sooner you’re investing 15%, the more confident you can be about having a secure retirement!
2. Use Tax-Advantaged Retirement Plans
Yes, we used the t-word, but don’t zone out! This is one time when talking about taxes can be exciting—or at least advantageous. Dave recommends you split your 15% retirement investing budget between tax-deferred retirement plans like your 401(k) and/or after-tax plans like a Roth IRA. It works like this:
–If your employer offers a 401(k) match, invest enough in your plan to receive the full match. That’s an instant 100% return on your investment!
–Invest the remainder of your 15% in a Roth IRA. You and your spouse can invest up to $5,500 a year in Roth accounts—$6,500 if you’re 50 or older. When you retire, you can use the money from your Roth tax-free!
–If your employer doesn’t offer a 401(k) match, Dave recommends you first max out your Roth, then invest in your employer’s retirement plan to meet your 15% goal.
3. Spread Your Money Around
The biggest risk you can take with your retirement money is to put it all in one place. That’s why Dave never recommends single-stock investing. If that stock takes a hit, it may never come back—and neither will your money.
With mutual funds, however, you can invest in the largest and most recognizable brands as well as new companies you’ve never heard of but that have plenty of growth potential. Choose growth-stock mutual funds with a history of strong returns for both your 401(k) and Roth IRA investments.
You can diversify—spread your money around—even more by choosing high quality mutual funds in these four categories:
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–Growth and income
Investing this way lets you use the power of the stock market to build your retirement nest egg without all the risk that comes with single-stock investing.
4. Stick with it!
While mutual fund investing is less risky than investing in single stocks, it is not risk-free. The stock market will have its ups and downs, and your money will go along for the ride. As long as you leave your money where it is and keep adding to it, you’ll see your nest egg grow in the long-term.
Several investing studies back this up. The most recent, a Fidelity study from July of this year, shows that employees who have participated in their plan for at least 10 years had an average record-setting 401(k) balance of $246,000. Their accounts have grown by an average annual rate of 15% for 10 years—and that includes the severe stock market drop five years ago!
5. Rely on personalized advice
Even though Dave knows a thing or two about money—and a whole lot about investing—he still relies on the advice of an experienced professional when it comes to his retirement investments. He trusts his investing advisor to keep an eye on his mutual funds’ performance and advise him when and if changes are necessary.
Dave recommends everyone work with a pro who has the heart of a teacher, someone who will answer your questions and make sure you understand each investment you’re putting your money into. Never settle for an advisor who talks down to you or suggests you turn over all your investing decisions to them. This is your retirement after all—no one will care about it more than you do!
We can put you in touch with an investing professional in your area who’s earned Dave’s recommendation for great advice and excellent service so you can get started on your retirement plan today!