If your retirement account is more goose egg than nest egg, you’re not alone — especially if you’re in your 30s or 40s.Since the first Gen Xers entered the workforce, there have been two recessions, including the tech implosion in 2000 and the 2008 financial crisis. Between 2007 and 2010, Gen Xers lost nearly half their wealth — an average of $33,000 per household —according to a recent study from Pew Charitable Trusts.
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Luckily, it’s not too late to turn things around. And now is a good time, with the economy picking up. Let’s get started.
1. Don’t think about saving
You may not be broke, but living in a major U.S. city will stretch most paychecks. So don’t focus on spending less right now, but saving first.
The best way to do that? Don’t think about it; make it automatic. You’ve heard it before, but behavioral finance research shows that if you set up a regular, automatic transfer to your savings or retirement account — or have your employer do it for you — you’ll be amazed at how quickly your savings will add up.
Glad you’re nodding! Now do something. Call a friend, make a pact and take action. Set a reminder on your calendar or phone (research shows these alerts help too.)
2. Be smart about where you save
If you have a 401(k) or something similar, start saving here, no matter what. Save as much as you can, especially if your employer offers a match (i.e. some companies contribute 50 cents for every dollar you save, up to a certain amount).
If you don’t have access to a 401(k) — many people don’t — you can open an individual retirement account or IRA. Just be sure to go with a low cost company, and be wary of cash incentives to open an account that might mask hidden fees.
Generally, if you meet the minimum balance requirement (and some companies waive that if you make automatic deposits), your IRA should cost no more than 1 percent of your total savings, per year.
3. Take the long view
It's natural to be scared of investing your hard-earned money into stocks, bonds and mutual or index funds. Which ones are best? What if you make a mistake?
Here’s what you need to look for:
• Low fees
• Index funds (which are also typically low-cost)
• No “get-rich-quick” promises
Above all, don’t let uncertainty stop you from moving forward. While we offer an easy way to get started investing at Betterment, take a look around and see what other companies offers something that’s a good fit. When it comes to your money, time is the most important investment you can make.
Jon Stein is the founder and CEO of Betterment, a leading online investing company that delivers smart, personalized financial advice paired with low fees and a superb customer experience. Got money questions?We’d be happy to address any money or investing issues you throw our way. Hit us up at email@example.com