I am wanting to start retirement fund but i have no clue on what or howto start?

[jhanvi]

Im 27 so iam getting a late start but i make pretty good money i just havent been putting anything back.Any suggestions on anything.should i invest or just start a separate savings account. I have spoken to an investment banker and he was telling me about putting back $100 a week and let them invest it for me.It just doesnt sit well with me to just fork over hundreds of dollars to someone ireally just met for about thirty minutes. I guess it would be easier if i had more friends or coworkers who invest . He pitch this idea to me and he said that i would be secure by the time i was 53. What i want to also is in aplan like this can i make purchases with this money and just pay back the account. I know there will be a major penalty to pay to due that. Can someone please give me some good advice.I really want to get started asap!

[derobert]

First thing you'll probably want to do is check if your employer offers a 401(k) plan. Especially if they offer a match, you'll want to use that. (e.g., if they offer a 3% match, that means if you put in 3% of your gross salary, they match that, doubling your investment at no cost to you. If you put in more that 3%, they'll still only put 3%. But if you put 0%, so will they.)

Second, when I quickly run the math on my calculator (possibly incorrectly), I'm not sure how $100/week for 1352 weeks will leave you enough money for a 30+ year retirement. You'd have, given an optimistic (but sanely so) 7% real return rate, ~$370k. That'd be living on about $18k/yr (3% real return) for the next 30 years. Once again, this math was done very quickly and without any thought; it may be off. All figures should be in today's dollars.

Do your parents have investment knowledge? Perhaps they could share some knowledge.

[MLS]

Being a part of the financial industry, I went ahead and ran the true calculations given the assumption of a 7% return, which is incredibly low over a 30yr span (which means you retire ahead of todays avg retirement age of 67 by 10 years), and it comes out to $490,835. So that's assuming you never increase your savings amount, which is unrealistic. In reality, if you put your money in either a 401K and/or Roth IRA, you can expect at least a 10% return in that time frame, and keep increasing your investment by 3% (keep pace with inflation)yearly, that would yield $1.181mil by 57. $3.4 mil by 67!!! It's amazing what interest in your favor does in that last 10 years. $400/ month is a great start in saving. In fact, the maximum you can put in a ROTH IRA in 1 year is 4K, and you'll have $800 more than that. Since you're so young, time is working in your favor. Do the 401K with the match like derobert says, but look in to a tax deferred account (ROTH IRA) for good investment diversification and low maintenance. That is unless you want to play the market. Risk is higher, but returns are well beyond 10% if you do it right.

[derobert]

Well, the previous 30 years of the S&P 500 is around 11½%, take out inflation and assume a portfolio not 100% stock, and 7% real return is pretty reasonable.

Not sure what I did with the math, maybe when I quickly did it I compounded it wrong...

Personally, I prefer to have the problem of having saved too much money than too little, but YMMV.

And, I definitely agree with using a tax deferred account. Your employer may even have a Roth 401(k) option, mine does.

[Umkhonto]

This blog has a very good entry on how to get started with investing.

http://simplelight.wordpress.com/2006/11/15/asset-allocation-in-30minutes-a-year/

Seems simple and won't consume your entire life. It took me about an hour or so to get up and running.