What is the best way to invest for retirement?

Overcoming barriers and kickstarting your retirement savings

Where To Begin?

It seems like every other day I read an article about how millennials aren’t saving for retirement. There are obvious reasons for this, which I will get into, but rather than bashing on millennials, I thought it would be more productive to create resources to help people to better understand investing. This is one of the main goals behind Investment Calculator. We want this site to be more than a retirement savings calculator, but also a place to get resources that help improve your retirement investment situation.

For many younger individuals starting to look into saving for retirement there are a slew of issues that. Many have student loans payments and are dealing with rising housing costs. Others don’t see it as a big priority or simply don’t know how. Overcoming these barriers is the first step towards improving your retirement outlook. While it may not seem like a higher priority than paying rent, or have a few extra dollars to go out with friends, the reality is that it is one of the best things you can do for your long term well being. In the same way that people “invest” in their fitness, saving for retirement is a way to “invest” in yourself.

Investing for retirement has many benefits such as:

  • decreases your taxable income
  • gives a greater sense of security
  • makes you a happier person

There are a lot of correlations between saving for retirement and working out. In the short term, you get a sense of accomplishment even if you haven’t seen results. And over the long term, you get to see amazing growth which is a reward in and of itself. If you are at the point where you know you want to get more serious about investing and more specifically retirement investing you are in luck.

Investing For Retirement

Most people are a familiar with the 401k account type. Many employers offer a 401k plus a match to their employees. If your employer offers this, the best way to get started saving for retirement is to take advantage of that benefit and maximize what you employer is willing to match (on average this is 2.7%). The amazing thing about contributing to your 401k is that it decreases your taxable income. Say for example you make $45,000 a year and your 401k contribution is 5%. This will reduce your taxable income from $45,000 to $42,750. Since the contribution limit as of 2018 is capped at $18,500 a year you may be able to save enough to drop you into a lower tax bracket.

If your company does not offer a 401k, there are still other retirement accounts that offer a similar benefit. An IRA (individual retirement account) is another type of account that gives you special tax benefits. There are several types of IRAs (traditional, ROTH, Simple IRA and others) that we won’t cover in this article, but are great topics for further research.

When you choose to invest in a retirement account, you will need to decide how you want to fund that account. This is where the “investing” part of things comes into play. Both retirement accounts and non-retirement accounts are able to use the same funds. For example, if I wanted to fund my retirement account with Apple stock, I could do that (although when investing for retirement, only investing in a single stock is far too risky).

Usually some sort of index fund (a fund that is made up of a many different stocks designed to follow a set of rules) is used to fund your retirement growth. The S&P 500 is an index that follows a collection of the top 500 companies in the US stock market. Over the long run, it has grown tremendously and allows investors to spread the risk over many different companies. As a rule of thumb, when you are saving for retirement, you can being by be more aggressive (pursue funds that have higher growth rates but come with higher risk - stocks) but over time move to more stable predictable funds (like bonds).

How To Get Started

The easiest way to get started is to take advantage of your company’s 401k. If you set a goal to increase your 401k contribution by 1% each month, you might be surprised on how little you miss that money. In general, the best way to save is to take the money out before you ever see it in your checking account. This helps relieve the temptation to spend it, and over time saving becomes addictive.

If your company doesn’t offer a 401k (or even if it does) there are some other options worth exploring. First, try and learn what you need to save in order to have the type of lifestyle you want in retirement. Our investment growth calculator and retirement savings calculator make it easy to play around and figure out what your savings goal should be. Next, open up a retirement investment account. There are several companies that make this easy Wealthfront, Betterment, and Vanguard. The first two are offer simplicity and easy of use being all digital. Vanguard on the other hand is a little bit more work to manage but has the lowest fees. Finally, set up a reoccurring investment based on your savings goal. Ideally, set it up to take it out the day after you get paid so you don’t assume that money is in your checking account to be spent.

Here are 10 tips to help you overcome some of the barriers and get started:

  1. Take advantage of your 401k if you have one
  2. Max out the employer match
  3. If you dont have a 401k set up a retirement account today
  4. Pay yourself first (aka take the money out before you are tempted to spend it)
  5. Set up recurring investments based on your retirement savings goal
  6. Increase the amount you invest each month even its only $5
  7. Use your tax refund to kickstart your investment account
  8. The more time you allow your investment to grow the better
  9. Even if you are discouraged by how much you are able to save, save at least something
  10. Get inspired by calculating your investment growth based on different savings goals


Playing with our investment growth calculator and retirement savings calculator are great ways to get an idea of where you stand when it comes to investing for retirement. Not everyone has the same goals (based on their desired lifestyle etc) for retirement, but these tools can give you a good idea of what your savings goals should be.

You will be amazed how much growth you can see over the long term by starting small and growing. We have a handy tip section with ideas to increase your investment savings. Make it your goal to try and save a little bit more every year. As your accounts grow, it is fun to plug this numbers into investment calculator and see what your potential growth will be. Regardless of what direction you take, start saving today and be amazed at where you are in a few years.