Frustrated Over 40: Seeking Simple Guides for 401K and Retirement Planning

A Reddit user is feeling very overwhelmed at the concept of saving for retirement. The poster explained that he’s over 40, his 401(k) is “garbage,” and most of his money is in a high-yield savings account. He knows he won’t ever save enough to retire if he keeps going down this path, but said “every time I even look at where to invest in the 401(k), my eyes glaze over and I want to shoot myself.”

He’s interested in finding some good references on calculators, tools, and how to choose the best retirement investments — which he feels he’ll need to be aggressive about at his age. So, what should the Redditor do?

These are the best tools to help you invest for retirement

When it comes to investing for retirement, you don’t need to make things complicated, and you don’t need a lot of tools.

There is, however, one helpful calculator that the Redditor should know about. There’s a calculator on Investor.gov that allows you to set a savings goal. You’ll input the amount that you need to end up with, the amount you’re starting with, how long you have to save, and your projected future returns to find out how much to invest over time.

If the Redditor uses this calculator, he can see exactly how much he should be investing in his 401(k) each month. Then, the only other thing he’ll need to do is to decide where to invest that money. The best tool for that is likely going to be the 401(k) itself, as most 401(k) plans offer screeners that show you the best place to put your funds based on your age and desired retirement timeline. 

The Redditor only needs to know a few simple rules to get on track for investing

While the Investor.gov calculator and the 401(k) fund screening tools will be helpful, the Redditor still may be confused about issues like how much he needs to end up with as a retiree, or which investments to pick.

Fortunately, you really do not need much knowledge at all to invest in a 401(k). There are only a few very simple things you need to know:

• You should typically aim to end up with 10 times your final salary. This is a quick rule of thumb that will help you decide how big your nest egg ultimately needs to be. 
• You should subtract your age from 110 to decide what percentage of your portfolio should be in the stock market, versus in bonds or other safer investments. 
• You should always invest enough to earn your full employer match, as that matching contribution is free money.
• You should eventually limit your withdrawals to around 3.7% once you retire so you don’t drain your account too quickly. 

If you follow these basic rules, you’ll be on track when it comes to retirement investing. You can also make things even simpler by putting your money into a target date fund, which automatically provides the appropriate asset allocation for you. Target date funds come with higher fees than some other investments, so they aren’t ideal for those who can do the research to find their own funds to invest in. However, that doesn’t sound like the Redditor’s position here.

Ultimately, the poster needs to get started, and if he simply uses the calculator to see how much to invest and then picks a target date fund, it will take about two minutes to do that and he can get back on track towards a secure future. 

If he’s overwhelmed with the process, talking with a financial advisor is also a good idea. A professional advisor can help him to make informed choices about how to invest and can talk him through the process so he has the peace of mind of knowing he’s making the right retirement moves. 

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