[{"@context":"http:\/\/schema.org","@type":"Article","dateModified":"2022-08-20","articleBody":"Choosing a college and planning for retirement might bring about similar emotions \u2014 like trepidation \u2014 plus some actual symptoms. (Am I right about those stomach flip-flops?) After all, it\u2019s easy to feel the fear of not getting your decision 100 percent right the first time around.  It can be tough to pull the trigger on the type of retirement fund that\u2019s the \u201cbest fit\u201d for you. (Are there retirement fund pamphlets all over your kitchen table? Is your laptop left open to articles that read, \u201cYour retirement fund: Which one won\u2019t poison your portfolio?\u201d Rest easy \u2014 it\u2019s totally normal.)  Compare your retirement woes to today\u2019s 17-year-old\u2019s impending decision. Every college-bound kid\u2019s got to wade through stacks of various college viewbooks. His Apple Watch bursts with messages like, \u201cHiya, Joe. This your admission counselor, and we\u2019re going to send you messages about 350 times a month until you visit XYZ University.\u201d  Have you ever thought about how planning for retirement and college are eerily similar? Just think about it! In both cases, you\u2019ll take some of the same steps:  Research your options Get the employer match (find the right financial aid match) Plan a visit Hope you won\u2019t choose the same one as your best bud List the pros and cons Make a life-changing decision Move in Here\u2019s what you can do to make sure your retirement is as on-target as your choice for your future alma mater.  Step 1: Research Your Options Admittedly, researching colleges might be a bit more fun than researching your retirement options (spending a weekend on a college campus versus analyzing asset allocations \u2014 I mean, which would you rather do?) As with most things in the 21st century, the college search process and retirement both start with robust online research.  Your investment choices ultimately depend on your wants and needs, and they might also depend on what your employer can offer you. Examine what\u2019s on the table just as you would when you choose the best college for you. Private college or public university? Go halfway across the country or stick close to home? Opt for an excellent biology program or stellar intramural program instead?  There are a few key types of retirement funds you\u2019ll want to know about. In most cases, you\u2019ll start with your employer-sponsored plan.  But what happens if your employer doesn\u2019t offer a retirement plan? You have options, and here are a few of them:  401(k): A 401(k) is a retirement plan that\u2019s sponsored by your employer. A 401(k) allows you to save a portion of your paycheck before taxes and put the money into investments of your choice. You pay taxes on your contributions, the employee match, and any growth when you retire. Roth 401(k): A Roth 401(k) is also a plan sponsored by your employer. However, there\u2019s a distinct difference compared to a Traditional 401(k). A Roth 401(k) allows you to save a portion of your paycheck after taxes. You don\u2019t pay taxes on your contributions or any growth when you retire. 403(b): A 403(b) is a lot like a 401(k), but it\u2019s for employees of public schools and certain tax-exempt organizations. You don\u2019t have to pay any taxes on allowable contributions until you withdraw from your plan in retirement. Roth 403(b): A Roth 403(b) is also called a tax-sheltered annuity or TSA plan. Just like a 403(b), a Roth 403(b) is an option if you\u2019re an employee of a non-profit agency, such as a public school or entity that\u2019s a 501(c)(3) organization. The only difference between a 403(b) and a Roth 403(b) is that you save a portion of your paycheck after taxes. You don\u2019t pay taxes on your contributions or any growth when you retire. Self-Employed 401(k), also called a Solo 401(k) or an Individual 401(k): Are you a business owner but don\u2019t have any employees except for yourself or a spouse? You may want to look into a Solo 401(k). It\u2019s a lot like a regular 401(k) \u2014 you contribute based on your pre-tax earnings, but you can save a lot more with a Solo 401(k) than a regular 401(k). Traditional IRA: You contribute pre-tax dollars to a Traditional IRA and your investments grow tax-deferred until retirement. You\u2019ll pay taxes on the money when you take the money out in retirement. Simplified Employee Pension (SEP) IRA: Are you a business owner? A SEP IRA might be a good fit. A SEP IRA gives business owners a way to contribute to their employees\u2019 retirement plans as well as your own. You\u2019ll follow the same rules as Traditional IRAs. SIMPLE IRA: A Savings Incentive Match PLan for Employees (SIMPLE IRA) offers both employees and employers a way to contribute to a Traditional IRA. Employers who don\u2019t have a retirement plan can use a SIMPLE IRA. Roth IRA: You might surmise that a Roth IRA has similar tax treatment to a Roth 401(k) and a Roth 403(b), and you\u2019d be correct. Put simply, contributions and your investment earnings grow tax-free so you don\u2019t pay any tax on your Roth withdrawals once you retire. Is the list of choices as tough as that first organic chemistry class you\u2019ll take in college? Remember to do your research \u2014 and ultimately, you\u2019ll want to start out with the plan your employer offers. Look into everything because your retirement deserves the most attention you can give it.  Also, know that you can invest in more than one retirement plan. For example, you can bolster your savings with a Roth IRA and invest in your company\u2019s 401(k) at the same time.  Step 2: Get the Match Do absolutely everything you can to get your employer\u2019s match. When an employer matches your 401(k) contributions, it means that your company contributes a particular amount based on how much you contribute to your own retirement. For example, your company might contribute 50 cents for every dollar you contribute, up to 6% of your pay.  Leaving an employer match on the table is just like refusing a college scholarship \u2014 it\u2019s absolutely unacceptable on your part. You want to get the best financial aid award you can for all colleges you\u2019re considering, which includes the best scholarships, grants, and any other financial aid a college is willing to give you.  Find out what your company match is, and save at least up to that amount \u2014 saving more than that is an even better goal.  Step 3: Plan a Visit You\u2019ll need to plan a visit. Luckily, visiting your human resources office is a little less formal than visiting a college campus, taking a tour, and meeting with the soccer coach.  Nope, think of it this way \u2014 HR is just a hop, skip, and a jump to the basement of your building \u2014 you might even be able to fit it in during a busy day. There, you can fill out a few forms that will enable you to sign up for your company\u2019s 401(k) plan, learn more about the company match and more.  And getting your retirement plan rolling can be even easier than that. These days, you can glean all this information without actually having to talk to a living human. But what if you\u2019re unsure about your options? Wouldn\u2019t you rather be able to ask specific questions about your personal situation?  Opt for the personal touch and let your HR office connect you with an investment professional who is affiliated with your company retirement plan.  Step 4: Don\u2019t Pick the Same One As Your Best Bud Remember all the grownups telling you not to follow your best friend, girlfriend, or boyfriend to the same college? Sound advice, right?  Same idea: Never invest for your retirement with a cookie-cutter approach, because no two retirements are exactly alike. For example, you\u2019ll need to save a lot more money if you plan to spend your whole retirement hitting every single foreign country on your bucket list.  Your cube-mate bestie won\u2019t need to save nearly as much as you if she plans to live next door to her grandkids and become their built-in babysitter. It\u2019d be a total mistake to choose the same retirement funds as your cubie, particularly if she\u2019s investing less than you\u2019ll need for your particular retirement goals.  In other words, resist the urge to visit HR together and check all the same boxes on the retirement forms.  Step 5: List the Pros and Cons No college decision is complete without the \u201cheart test\u201d or the \u201cgut test\u201d \u2014 a simple \u201cfeeling\u201d that a particular college is perfect for you. So many college decisions are made using that simple barometer. You know you\u2019re on the right track when you say things like, \u201cThe professors care about me. The tennis team is welcoming. They didn\u2019t care that I slept with a stuffed bunny rabbit during my overnighter.\u201d  But\u2026 what if you can\u2019t decide? What if two colleges are clambering for you and you\u2019ve felt at home on both campuses? You can\u2019t attend two colleges\u2026 so you make a pros and cons list.  Similarly, you have to feel good about the investment portfolio you\u2019ve chosen.  Consider your risk when you choose which type of retirement account you want \u2014 your age will impact the amount of risk you take on. For example, if you\u2019re younger, you\u2019ll want to invest in a more risk-heavy portfolio with more stocks, but if you\u2019re inching closer to retirement, you might want to invest more heavily in bonds or other conservative investments to reduce your risk.  Check with your plan administrator if you\u2019re not sure which route to tackle.  Step 6: Make a Life-Changing Decision At this point, you decide whether you\u2019re going to head for a state school or a liberal arts college. This is also the point where you determine how you want to allocate your retirement dollars. You\u2019ll also decide how much to contribute.  In 2019, you can contribute the following amounts:  401(k): You can contribute $19,000 to a 401(k) with an additional $6,000 catch-up contribution if you\u2019re 50 or older. Roth 401(k): You can contribute $19,000 to a Roth 401(k) with an additional $6,000 catch-up contribution if you\u2019re 50 or older. 403(b): You can contribute $19,000 to a 403(b) with an additional $6,000 catch-up contribution if you\u2019re 50 or older. Roth 403(b): You can contribute $19,000 to a Roth 403(b) with an additional $6,000 catch-up contribution if you\u2019re 50 or older. Solo 401(k): You can contribute $56,000 with an additional $6,000 catch-up contribution if you\u2019re 50 or older. SEP IRA: You cannot exceed the lesser of 25% of compensation, or $56,000 in a SEP IRA. There\u2019s no catch-up contribution at age 50. SIMPLE IRA: You can contribute up to $13,000 to a SIMPLE IRA with a catch-up contribution of $3,000. Traditional IRA: You can contribute up to $6,000 to a Traditional IRA with a catch-up contribution of $7,000 if you\u2019re age 50 or older. Roth IRA: You can contribute up to $6,000 to a Traditional IRA with a catch-up contribution if you\u2019re age 50 or older. Step 7: Move In What\u2019s left? Yep, move on your decision \u2014 just like you\u2019d move into your college on moving day.  And know this: It\u2019s never too early to start thinking about both your college decision or your future retirement.  Give yourself some peace of mind and make a decision early on in your working career. After all, you wouldn\u2019t want to wait till May of your senior year to make a final decision about college (and give your parents a heart attack in the process).  It\u2019s also never too late to start saving for retirement \u2014 even if you\u2019re not as young as a prospective college student.  Melissa Brock is the Money editor at Benzinga. She spent 12 years working in the admission office of her alma mater, Central College, and knows a thing or two about helping high school students and their families choose the right \u201cfit.\u201d","description":"This article is about retirement planning steps.","name":"Retirement Planning Steps Article","datePublished":"2019-10-07","headline":"How Planning for Retirement Is Like Choosing a College","image":"https:\/\/moneydoneright.com\/wp-content\/uploads\/2019\/10\/planning-for-retirement.jpg","author":"Melissa Brock","publisher":{"@type":"Organization","logo":{"@type":"ImageObject","url":"https:\/\/moneydoneright.com\/wp-content\/uploads\/Money-Done-Right-Personal-Finance-and-Investing-Blog.png","name":"Money Done Right Logo","height":"488","width":"60","@id":"https:\/\/moneydoneright.com\/#ImageObject"},"address":{"@type":"PostalAddress","name":"Money Done Right Address","addressCountry":"United States","addressLocality":"Valencia","addressRegion":"California","postalCode":"91354","streetAddress":"23890 Copper Hill Dr Ste 139","@id":"https:\/\/moneydoneright.com\/#PostalAddress"},"url":"https:\/\/moneydoneright.com\/","publishingPrinciples":"https:\/\/moneydoneright.com\/methodology\/","additionalType":"Blog","name":"Money Done Right","email":"support@moneydoneright.com","sameAs":["https:\/\/twitter.com\/moneydoneright","https:\/\/www.facebook.com\/moneydoneright\/","https:\/\/www.instagram.com\/moneydoneright\/","https:\/\/www.linkedin.com\/company\/money-done-right\/","https:\/\/www.pinterest.com\/moneydoneright\/","https:\/\/www.youtube.com\/c\/MoneyDoneRight"],"foundingLocation":"https:\/\/en.wikipedia.org\/wiki\/Santa_Clarita,_California","legalName":"Allec Media LLC","naics":"519130","parentOrganization":"https:\/\/moneydoneright.com\/#ParentOrganization","founder":"https:\/\/moneydoneright.com\/author\/logan-allec\/","@id":"https:\/\/moneydoneright.com\/#Organization"},"mainEntityOfPage":"https:\/\/moneydoneright.com\/passive-income\/stock-investing\/retirement-planning-steps\/","@id":"https:\/\/moneydoneright.com\/passive-income\/stock-investing\/retirement-planning-steps\/#Article"},{"@context":"https:\/\/schema.org\/","@type":"BreadcrumbList","itemListElement":[{"@type":"ListItem","position":1,"name":"Passive Income","item":"https:\/\/moneydoneright.com\/passive-income\/#breadcrumbitem"},{"@type":"ListItem","position":2,"name":"Stock Investing","item":"https:\/\/moneydoneright.com\/passive-income\/\/stock-investing\/#breadcrumbitem"},{"@type":"ListItem","position":3,"name":"How Planning for Retirement Is Like Choosing a College","item":"https:\/\/moneydoneright.com\/passive-income\/stock-investing\/retirement-planning-steps\/#breadcrumbitem"}]}]