Further, I’d add the following. Know that saving 10% is not going to be enough. Do not depend on Social Security being present when you retire. Understand that you and you alone will need to bear the responsibility of providing a comfortable retirement for yourself, and 10% is inadequate. Beyond your 10% in your 401(k), you must also open and fully-fund a Roth IRA (the max is currently $5,000/year). Finally, I would also strongly recommend opening an after-tax investment account with a reputable broker offering low-fee, passively managed index funds or target-date retirement funds, like Vanguard. Set up automatic contributions to this account for another 5-10% of your income.

Make as much of this automatic as possible. Then forget about them. Live your life, enjoy spending what’s left, enjoy being a young man in the prime of his life. If you’re sincerely interested in this stuff (and most of the people here are), then of course delve into it and read a bunch of books. Use the knowledge you gain to tweak your investment allocations. But if you only do what I’ve recommended here, you’ll still be miles and miles ahead of your peers.

You can decide to take on the risk, but you can’t decide not to have the risk of ending up with 10, 15 or even 30 years of a retirement in which you are unable to work at most jobs. Now, you may have such a portable/flexible career where there are few disabilities which would sideline you, but most folks don’t.

OTOH, in my case, I saved heavily for a retirement I will not live to see. So the risk runs both ways.

Life is a very uncertain proposition.

I think it is generally recommended to invest in a no-load mutual fund. I think the fees should be under 1% (but I can’t remember for sure) and no 12(b)1 fee.

Suze Orman covered this at some point so she may be a good starting place for some research. Vanguard has some good funds and there are other firms out there as well if they are on your list of options.

The 23 year old tells you he is clueless.

He tells you he put the money where someone told him to put it.

And you say don’t sweat the details.

I must strongly disagree.

Suppose he put it all into one stock because he was given a tip? Would you tell him that it’s ok? Of course not.

Suppose he put all of it into his own company’s stock. That’s terrible also.

I know you are a believe in passive investing and don’t need to sweat the details, but this guy must at least place his funds in something reasonably appropriate. With LOW fees.

Regards,

The final piece of #7′s advice is really good for young professionals. Even if the job is great now, a bit of management change can turn it into a nightmare situation. Not having enough experience to leave for something better, that can be a career staller.

As several have already mentioned, even though you like your job now, this may change down the road and maybe faster than you expected(*). If so, it is really nice to effectively be financially independent. This of course requires the concentration of a lifetime of savings within a decade and thus savings rates way above and beyond the standard 10-15%. This also means that one has to look elsewhere than 401ks and IRAs which have been designed to keep most people in their jobs until they are too old to work—same with standard 30 year mortgages.

(*) Consider that if you love your job with a passion, you could also grow to hate your job with a passion. Being more agnostic towards your job may be a safer long term strategy if you plan to be tied to a job for most of your adult life.

I’m an engineer by trade, and like to dabble in personal finance and investing as a hobby and personal development. I maxed out my 401k, 6% with 50% match (unfortunately I only get 20% per year). And I’ve been planning on opening an IRA, but I keep putting it off. I’m pretty frugal, living on a budget someone resembling my college days, but loosened up a bit since I actually have money now.

The only difference is, I don’t have a savings account. I have a good grasp of my finances, and I don’t impulse spend, so I keep my money in my rewards checking account. I maximize my interest, and since I pay with plastic anyways, not a big deal to meet the minimum requirements. I use debit for all my small purchases, which amount to ~15 a month, and everything else goes on the credit card which is paid off at the end of the month.

To me, the bulk of my retirement savings will be money I earn and save, not from investment gains. I am planning my retirement along the lines of what I’m guaranteed to have. Any gains from investments I dabble in will just be a bonus, and money I have in investments later on in life, will be 100% disposable in case of a stock market crash. As long as I keep lifestyle inflation in check, i should be able to have a nice retirement even without investing in stocks.

Currently, I’m a 23 Y.O engineer, pretty much fresh out of college. To me, my earnings will go up as I gain more experience, and the best return on the investment of my time is to improve myself as an engineer. I am proactive in solving problems and reading up on new developments within my field to stay informed.

In one year’s time, due to lucky breaks (yeah, this recession helped my position within the company), I’ve gone from the bottom of the totem pole to one of the people they depend on for certain aspects of the design process. I came in with a little specialized knowledge, and ended up being the company expert on the material. As they came to me more and more, my knowledge, experience, and expertise relative to the company increased.

My career plans pretty much jumped a couple steps because I was proactive in learning on my own time, putting in hours and compiling research and data on my own time, to improve myself. The return on this will grow even more as time goes on.

There’s nothing wrong with planning on working your whole life… especially if you enjoy what you do. But I’d still advise saving fully for retirement for 2 reasons. The first, Trent mentioned slightly and that is you probably won’t be able to drop dead with the hammer in your hands. Some people become disabled and unable to work a long time before they die.

The second reason is that although you currently are happy with the idea of working all your life a couple decades down the road you may change your mind. If you do end up changing your mind about working forever and don’t have money saved up than you won’t have the option of retiring.

Overall really great advice!

Your advice stating “just worry about saving now – don’t sweat the details” is excellent advice for those in their early twenties. It sounds like your reader is doing just that.

It’s also refreshing to hear retirement advice that takes one’s desired lifestyle into consideration. But when you are in your early twenties, you probably don’t have a very good idea about the type of retirement you want, so your advice to just get started really applies.

You likely will get a greater grasp of retirement and what you want to do as you get older. The best thing now is that you are saving. 10% is a very good rate of saving at your age – good decision.