What to Invest Within the Retirement Accounts

You might ask which stock should I invest in for the retirement accounts, there are thousands of them to choose from.  The easiest way to invest is to invest passively, which is through an index fund.  An index fund is an investment equity that aims to replicate the index of a specific financial market.   You might have heard of the S&P 500 index which consists of the 500 largest market cap stocks in the U.S.  It is best to invest early as possible to let compounding to the work for you. If you are not sure what fund to choose, choose either an index fund that tracks the whole market (the entire world) or a target date retirement fund that invests in indexes. If you later choose to decide on a specific asset allocation you can later change it and shift the funds around.

How Much to Save 

Pay yourself first is an oft-used quote for how much to save.  Basically, if you first take a chunk out of your paychecks for your retirement accounts then you will be less tempted to spend the money on frivolous things.

I've found that the following works well for me.

1.     6 months emergency cash savings in a Savings Account earning 5+% APY interest.
2.     Max out my Roth IRA and 401k
3.     Put the rest into regular taxable brokerage accounts or savings accounts.  (optional)
   

After you pay yourself first in the retirement accounts, you can spend the rest of your paycheck should you choose to do so or maybe save some of it for regular taxable accounts and spend the rest. Personally, I save over 90+% of my paychecks, which may be a hard to attain goal for others as each person's situation will differ.

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