I did not start a Roth IRA until last year at39 years old! I regret not starting one when I was 20 and missing out on all of the tax-free growth. My recommendation would for you to open a Roth IRA. I think they are the best way to save for retirement. Despite knowing how great they are, I delayed investing in one for 19 years during my working career.
Make Your Plan
Personal finance is personal! Figure out your plan and make it work for you. I chose to start my 401k as soon as I was eligible at age 20. I have always contributed enough to get the company match. That should always be #1 on any retirement investing pyramid. After receiving the company match, #2 should be to max out a Roth IRA.
Once my wife graduated from college, I decided to increase my contributions to my 401k above the company match. Since we had a Roth 401k option, I decided to split the contributions of my Roth 401k and Traditional 401k.
Despite knowing that a Roth IRA would allow me to have more control over my investment options, that would mean lower fees and a more extensive selection of investments. I also was aware that I could use the Roth IRA for a down payment on a house. I even could withdrawal my contributions after five years if I needed to for any reason.
The 401k made sense for me, and it allowed me to pay myself first! My company had reasonable mutual funds, and at the time, I was not familiar with index funds. Since I was able to contribute to a Roth 401k in my mind at the time, I did not need to do a Roth IRA.
With a $500 increase each year at 8%, you can save over 1 million in 30 years.
Keep in mind each year you should receive a pay increase.
Apply that and you will barley notice the difference
Know Yourself
Because I paid myself first, I made sure that I saved the money for retirement. If I would not have contributed the extra amount to the 401k, there is a good chance that the money may or may not have made it to a Roth IRA. I may have spent some of it, but most of it probably would have gone to paying off the house early. We paid it off in 11 years. There was no need to pay it off any sooner.
You Don’t Need To Know Everything
Remit Sethi talks about The 85 Percent Solution in his book I Will Teach You To Be Rich. He says: “Getting started is more important than becoming an expert.” I was never an expert. I have learned so much in the last few years. I knew enough about the importance of starting early and what compound interest would do with time.
We don’t need to optimize everything or know everything before getting started. The important thing is we need to get started. We can learn and improve our knowledge after we get started. By taking the money out thru your employer, you guarantee that you are saving and investing in your future. If you know that you will put that money in a Roth IRA, that could be a better option for you. Don’t overthink it. Know yourself and make your plan personal.