As a young professional in my late 20s, what else should I be doing to make the most of my money and save for retirement?
I am a young professional in my late 20s. I have no student loans and my vehicle is paid for. I have a 403(b) plan through work and contribute 10 percent of each paycheck to it. My employer does not match these contributions. I am saving about $1,000 a month and placing it in my savings account, which now has about $35,000. I recently moved $15,000 of that money into an online savings account for the higher APY to have as a safety net.
I am very confused by the financial world, but I want to make sure I am making the most of my money and savings. Is there anything different I should be doing with my money to better save for retirement?
You seem to be doing well with your overall financial plan. So, while the financial world is confusing, you seem to be doing a good job of conquering it. I will assume the $35,000 is sufficient for an emergency fund for yourself, and at your age 10% is likely a good target for saving for retirement. The next step would be to look at your other goals and begin to prioritize your near-term lifestyle desires along with long-term goals.
Save For The Next 10 Years
Start by focusing on the big, expensive events you want to accomplish over the next ten years. For many in your age range, these could be investing to save money for a home down payment, a wedding, starting a business, having children, traveling, or other major goals you might have. Then figure out how much you would need to save to accomplish each goal. These goals will likely be saved for in a traditional investment account, so you won’t have the same tax advantage as your retirement accounts.
Investigate Your 403(b)
You also should make sure the 403(b) investments are invested in an appropriate way for your age and risk tolerance. 403(b) plans are often filled with annuities, which have incredibly high fees and are generally not appropriate for younger investors. If the 403(b) has poor investment choices or high fees, consider maxing out an Individual Retirement Arrangement (IRA) account before contributing to the 403(b) beyond any match.
Consider an Adviser (but not a financial sales rep)
You might also think about getting a financial adviser to help you navigate this journey and make the financial world a little less confusing. A good fiduciary and fee-only financial adviser can help you discover and plan for more of your goals, be an accountability partner and sounding board, and see opportunities specific to your situation. Be careful when seeking an adviser, though, as some are simply commissioned salespeople.
Be Confident in Your Financial Knowledge
And don't feel bad about the financial world seeming confusing because it is extremely complicated. Unfortunately, we do have a very complex financial system. As an example, when I did the CFP coursework, the book for the Intro class was over 800 pages long. The fact you are already successfully doing the typical financial advice and still find finances confusing means you understand money enough to see the complexity beyond the basics.