November 13, 2023
Question:
I’m new to investing and just started a job with a retirement plan. I didn’t do anything, but I was automatically put into one of the funds based on when the company thinks I will retire. Should I just go with that?
Answer:
Just do a quick check on that automatic option.
I am assuming it is a “target date fund” which matches your anticipated retirement date with your current age.
So, if you are 25 and the plan thinks you will “retire” in 40 years, then that target date fund should have 2065 in the name which is close to the year you might retire.
The fund will be more allocated to equities, which based on history can have a good chance of increasing in value over the next 40 years.
The next thing you should do is contribute as least as much as your company is contributing.
If they contribute 3% of your salary on your behalf, you should contribute at least that amount to qualify for the company match.
And best yet, that 3% you contribute is pre-tax!
Do your friends ask you financial questions?
Pass those questions on to us at AskRPG@rootedpg.com and we will feature them in our future newsletters.