How to invest for retirement at any age

Brian Ford:

Welcome to Money and Mindset with Bright and Brian, a podcast that's all about connecting your personal finances with your well-being. I'm Brian Ford, the head of financial wellness at Truist, and I help people take charge of their money so that they can have more control over their lives. I'm joined as always by my co-host, the great Bright Dickson, our resident expert on happiness and positive psychology. How are you doing today, Bright?

Bright Dickson:

I'm doing great. How about you, Brian? How's your day so far?

Brian Ford:

I am doing good. I'm excited about today's episode partly because I think a lot of our listeners are going to enjoy today's discussion. Investing for retirement is by far one of the most popular subjects in personal finance. In fact, Bright. When I teach financial wellness classes, it's one of the things I get asked about the most, and for good reason. So this is a big and important subject. And that's true whether you're 24 years old and just starting to put money in your company's 401(k) retirement plan or whether you're 50 years old and realizing you need to play a bit of a catch-up so you have the option to retire and enjoy the future you want.

Bright Dickson:

Big and important is absolutely true when we talk about investing for retirement, but I also know that it doesn't have to be scary. This is something that anyone can do, and planning for your future is something that everyone should do. So on today's show, we've got actionable tips you can follow and some inspiration to help you stay motivated. We're also going to call out a few specific resources later in the episode, but I do want to quickly plug all of the tools on our website. Whenever you're looking for a little financial confidence boost, a good place to start is Truist.com/money-mindset. We have a whole section on the site focused on investing and retirement. With that said, Brian, are you ready to talk about securing our financial futures?

Brian Ford:

Absolutely. Let's go.

Bright Dickson:

So, Brian, you mentioned that investing for retirement is a subject that can really grab people when you're teaching classes. Can you speak on your experience with that?

Brian Ford:

Yeah, for sure. I've taught thousands of people about personal finance, and when I give a class on investing, at the end of the class, it's almost inevitable that someone will come up to me and say, "Brian, like, man, that was awesome, but where were you 30 years ago when I really needed this stuff?" And normally I'm like, "Well, I was in middle school." And I'll joke with them like that partly because I'm just trying to ease the tension a little bit. Most people who are asking that type of question, they usually have some serious worries about the fact that they're behind on saving for retirement, so I try and ease things up a little bit.

Bright Dickson:

Yeah. Well, I mean, let's be clear, Brian, you also joke like that because you can be pretty funny when you want to be.

Brian Ford:

That in and of itself is funny, Bright. I wish my wife thought so. But the idea is that once I've broken the tension with this person who's worried about their future, I try and pivot the conversation. I'll simply let them know, "You have time. It's not too late. Start applying the financial principles we're talking about and you'll be surprised how quickly you can get on track." And that's true. It's not too late to start getting serious about investing for retirement no matter what age you are.

Bright Dickson:

And it's never too early either, right?

Brian Ford:

Oh, absolutely right. In fact, the best time to start investing for retirement was yesterday. The sooner you start, the better off you're going to be. And I share that story about my classes for our older listeners, but also the younger folks out there. I don't want that to be you. I don't want you to be in a personal finance class in your 60s saying like, "Dang, that was good. Why didn't I learn this 30 years ago?" This episode is for you. Get going today and you'll be so glad you did. I've seen both ends of the spectrum. Bright, I've sat down with couples in their 60s who are wanting to retire, and sometimes, unfortunately, I have to be the bearer of bad news when I look at their savings and investments and have to let them know probably not yet. But then every once in a while, I sit down with a couple and I look at what they've saved and I'm so happy to tell them, "You did it. You can retire if you want to, if that's where you want to go."

And so if you're listening to this now, I want you to be in that latter group, to have the ability to retire on your terms with dignity and confidence.

Bright Dickson:

And I don't want to dwell on anything too gloomy here, but I think mentally, it's important to visualize both of these outcomes, right? Retiring comfortably and with dignity and the opposite, not being able to retire when and how you want to. And one thing that can help motivate us to action is to really understand the consequences of not doing something. There are other ways in which we do this. In Canada, so let's say you want to buy cigarettes in Canada, there's a picture of a diseased lung on the box of cigarettes because that's what happens if you don't quit smoking and they want you to visualize it because it's better for you to not buy those cigarettes, right?

Brian Ford:

Yeah. It's the same thing in Europe. I was in Germany last summer with my son, and if I remember right, I saw a box of cigarettes, and on the side was this huge label that just said... I mean, massive. It took up the whole box. It said, "Smoking kills," With huge lettering.

Bright Dickson:

Right. So in this case, not saving for retirement is likely to have serious consequences just like smoking does. So you might run into trouble with housing or become completely reliant on family members or friends. You're working longer than you want to, or may even need to work longer than you're able to because as you age, it's likely that your health is going to diminish, right? That's part of what we see. On top of that, a lack of retirement savings can affect your mental wellness long before you retire. There's plenty of research showing a connection between financial stress and mental stress, and polls from Gallup show that out of all of our financial concerns, Americans worry the most about having enough money saved for retirement. Surveys show that more than half of us think we won't have enough money to live comfortably when we retire, and that's scary.

Brian Ford:

Yeah. I mean, most of us at some level know we should be saving for retirement. But to go back to that box of cigarettes though, there are plenty of smokers who light up even though they know what they're doing to themselves is not great. But from a mindset perspective, Bright, what are some barriers that might keep people from starting to invest for retirement?

Bright Dickson:

Yeah. Well, I mean I think people can feel discouraged, especially if they feel like they're already behind. But it's like you said before, it's never too late. The most important thing is to get started. And it's not difficult to get started. There are a lot of resources out there that can help make it very easy to start. Depending on where you work, your company's HR department is likely going to have info to help you get started or to grow your savings through some type of retirement plan, and that's a really good place to start. Whatever your situation is, remember that you're not on your own and you can do this. Don't be afraid to ask questions, don't be afraid to learn. And with that said, Brian, what are other ways that people can invest for retirement?

Brian Ford:

Well, we briefly mentioned 401(k)s already, and if you work for a company that offers a 401(k) and haven't already started saving in it, do that now. If you don't have access to a 401(k), no worries. There are other types of retirement savings accounts that you can use that we'll cover in just a little bit, but if you have access to a 401(k), that's the main vehicle that you should be driving into the sunset of retirement. And so one of the things is, 401(k)s have some big tax advantages that come with investing in that particular retirement vehicle. With traditional 401(k)s, your contributions are tax deferred, meaning you don't have to pay income tax on that money until you withdraw after retirement. This means that it can grow tax-free for many years and you can start withdrawing that money without worrying about penalties after you turn age 59 and a half.

But Bright, I want to touch on another big benefit of many 401(k)s and briefly explain a key investing principle. It's important to know that with investing, there's a relationship between risk and return. Generally, the greater risk you take, the greater opportunity for return. That's why cash is very safe, but you don't get much return. In fact, inflation may eat away at the value of that cash over the years. On the other hand, when you invest in the stock market, you're taking on more risk because the market's naturally going to go up and down at different times, but your opportunity for return is greater. And many stock market investors, they're looking for an eight to 10% annual return on their money long-term over time. But in order to go after that return, you have to take on the risk of not knowing when the market's going up or down.

Bright Dickson:

And I think our attorneys at Truist are going to want us to emphasize that point, right? So just to reiterate, investing involves risk. The value of your investments will fluctuate over time and you may gain or lose money. And although history could be a really good indicator, nothing is guaranteed.

Brian Ford:

Very true. Thank you, Bright. OK, so with all that in mind, let's go back to your 401(k). Many companies with a 401(k) plan offer a match, meaning they'll match your contributions up to a certain percentage. So let's say your company matches a dollar for every dollar you put in up to a certain percentage of your income. So, Bright, if you put in a dollar and your company puts in a dollar, what's that rate of return?

Bright Dickson:

I'm going to go with 100, Brian. Final answer, 100%.

Brian Ford:

Boom, it's 100%. So now remember that a lot of investors are looking for about an 8% return, me included, but we need to take on risk for that 8%. So if anyone other than your employer says they can double your money with a 100% return, you should turn and run. They're lying to you or you're watching some get-rich-quick influencer you shouldn't be paying attention to. Even if your company matches 50 cents for every dollar, so you put in a dollar, they put in 50 cents, that's still a 50% rate of return. So, please, if you have access to a 401(k) and your company has a match, make sure you’re contributing enough to at least get that full match.

Bright Dickson:

And for our listeners, getting started with a 401(k) is super easy. And once you realize that it's not quite as hard as you may have initially thought it was, that's going to give you a boost in and of itself. Even if you're nervous, you're going to feel more confident and more excited once you get started, and that's self-efficacy, right? We've talked about self-efficacy before, but it's basically like, we learn how capable we are of doing things by actually doing things, and this is no different.

Brian Ford:

Totally. And Bright, this is something I wanted to ask you. Part of investing for retirement involves thinking long-term. You're putting your money toward the future you. So what's a good way for our listeners to conceptualize the fact that they're taking care of their future selves?

Bright Dickson:

Yeah. I mean, I think one sort of tool here is that automation, Brian. Automating your finances, which is something that I know you love. It can be really helpful here, especially if you're younger and you're dealing with that 401(k), sort of having a set it and forget it attitude can be pretty helpful. So I've done that. My 401(k) contributions automatically come out of my paycheck, and I basically pretend like that money is not even mine or it's not mine now, so I'm not tempted to touch it. It's over there. I don't have it in my day-to-day calculations at all. So my retirement account is kind of living its own life and our lives will join together eventually, but not now. I do check it a couple of times a year, and that's working really well for me because every time I check it, I'm like pleasantly surprised, right? It's like, oh, I only had to do this one thing one time, and there it is, and it's kind of magical, actually.

Brian Ford:

It is kind of magical. It's the magic of compound interest, which Albert Einstein once called the most powerful force in the universe. And Einstein also said, this is like my favorite quote, I'm dropping this one with my kids all the time, but Einstein also said, "He who understands compound interest, earns it. He who doesn't, pays it."

Bright Dickson:

I feel like Einstein's a guy we can usually trust on concepts like that.

Brian Ford:

I agree. He's a pretty smart dude. And he said that because the power of compound interest, it's special. I'm just going to sketch out the basic outline of compound interest, which is the principle that explains how the returns you earn from investing are calculated as a part of your future returns. So as you make money, that money makes more money, helping you potentially earn more and more over time. And the more time you have, the more of an effect compounding can have on growing your initial investment. So Bright, compounding is a part of the magic you're seeing every time you check your 401(k), and it's why it's important to start investing for retirement as soon as you can. So as I think about this, there's another investing principle I want to mention quickly. It's one we've mentioned in the past; it's one that I love. I'm just going to do it quickly, Bright. I'm not going to go crazy and nerd out on the full math behind it, but this quick principle is just simply called dollar cost averaging.

It can really help you to continue investing consistently over time. The idea is that you invest a fixed amount of money at regular intervals, like every time you get paid, for example, regardless of what's going on with the market. That way you're trying to reduce the impact of market ups and downs and helping to average out the cost of your investments over time. So what's cool, Bright, is you mentioned this already. If you're contributing to a 401(k) or some other type of retirement account automatically with each paycheck, then you're already putting dollar cost averaging into practice and you should just keep it up.

Bright Dickson:

Listeners who want to go deeper on investing should definitely check out some of our past episodes on the subject. I'm thinking specifically of one we did called “Reasons you're not investing and how you can start,” and another one where we had a special guest, Dr. Daniel Crosby. But for now, I feel like we've got a good startup plan for our listeners, open up a 401(k) and start putting money into it regularly. We recommend automating that. But what happens to that money after you put it into a retirement savings account like a 401(k)? Don't you have to decide how to invest it?

Brian Ford:

Yeah, some company 401(k) plans will have a default option chosen by the plan sponsor who's going to be deciding how that money will be invested. But a lot of plans, I'd say most plans, either give you a choice or require you to make the investment decisions with that money in your 401(k). So later in the show, we're going to touch on some of the ways you can fine-tune your retirement investments as you go along. But for now, I want to talk about a certain particular kind of fund in particular. Oh, by the way, we also have an article on our companion website that's all about tips for managing your own 401(k). We'll share that in the show notes for today's episode. But for just a minute, I want to mention that fund that I was mentioning, that target date fund and what that is because it could be a good investment option for a lot of folks saving for retirement. So I mentioned it's called Target Date Funds, and they're professionally managed funds with a specific retirement target date.

So for example, if you want to retire when you're 65, and you know you're going to turn 65 in the year 2055, you could choose to invest in a 2055 target date fund. And usually the fund's just named that, it's like 2055. Now, the managers of that fund, they're going to run it in a way that reduces risk as we get closer to that retirement date. They'll periodically rebalance the fund's investment portfolio, selling off riskier investments like stocks possibly and buying more conservative investments like bonds as you get closer to retirement. And if you're more of a set it and forget it type of saver, a target date fund, it might be a good option for you. Again, you can worry about that fine-tuning later. If you're on the younger side and just getting going with your retirement savings, what's important is that you simply get going. Start putting as much money as you can into your 401(k) even if it doesn't seem like much at first, and consider a target date fund.

Bright Dickson:

So, Brian, we've talked a lot about 401(k)s so far, but what if you don't have access to one? What other retirement savings accounts are available?

Brian Ford:

Yeah, if you don't have access to a 401(k), the first item on your checklist should be opening up an IRA, which is an individual retirement account. You don't need to go through your employer for an IRA. And I'll say even if you do have a 401(k) and you're already maxing that out, opening up an IRA as a compliment to your 401(k) savings can be a way to supercharge your retirement savings even more. But one question I get asked a lot is whether you should go with what's known as a Roth IRA or a traditional IRA. You may even have this option with your 401(k) plan. The main difference between a Roth and a traditional retirement account is when you pay the income tax. With a Roth, you go ahead and pay the taxes on the income now. The benefit is that when you retire, you won't have to pay income on your withdrawals.

So I like Roths, this is just personal, me talking to my daughter now. I like Roth IRAs and 401(k)s because when you put that money in, you know you've already paid taxes and that amount you look at online or when you get your statement, you know that's the money you'll get at retirement. So from a purely psychological standpoint, I personally like Roths. With a traditional IRA or 401(k), you're deferring those tax payments until retirement. And a good financial advisor can help you sort through the specifics. But the truth is, Bright, there isn't a right or a wrong answer here. The difference isn't that big of a deal. A lot of people get caught up in the details, and you can choose whichever makes sense for you. What is a big deal is saving and investing in the first place. Try to max out those tax-advantaged retirement accounts if you can, and don't sweat the small stuff like choosing between Roth or traditional.

Now, if you're really crushing it with those tax-advantaged retirement accounts, you can also consider using a regular brokerage account to invest for retirement. So 401(k) first, then IRA, then if you still want to save more for retirement, consider a brokerage account. Another consideration to discuss with your planner, and this one's kind of fun if you want to look more into this, listeners, it would be an HSA. So if you're enrolled in a high deductible health insurance plan, you might also have access to what's known as a health savings account, or an HSA. The main purpose of an HSA is to put away tax-free money to help you pay for out-of-pocket medical expenses, but you can also treat it as an investment tool for retirement, and that can be a good option. But I can't emphasize enough that a 401(k) and an IRA, they're going to be your main, primary options. Those really are your best friends when it comes to taking full advantage of your retirement savings potential.

Bright Dickson:

Saving and investing as much as you can seems like a good thing when it comes to retirement planning, but as much as you can, that can look really different from person to person. Can we put a number on it, Brian? How much should we be saving really?

Brian Ford:

Good question. Tough question for a podcast, but if you have a 401(k), you definitely want to be saving up to your employer match, which is what we talked about earlier. Remember, that's basically free money, but generally speaking, most financial planners recommend saving at least 15% of your income over the course of your career if you want to retire sometime in your sixties-ish. These are pretty big rules of thumb here. But if you haven't been investing around 15% of your income, you might be a little behind. Now, if you want to supercharge that and go to 20% or 25%, then you might be able to retire a little sooner-ish. And I will mention, too, if you're interested in supercharging your savings so you can retire early, you may want to look into the FIRE movement, and FIRE simply stands for Financial Independence, Retire Early. And you should definitely check out one of our past episodes called “What is FIRE? And is retiring early possible for you?” But Bright, I think the way you put it is correct, save and invest as much as you can for retirement.

Bright Dickson:

In other words, max out your retirement savings accounts if you can.

Brian Ford:

Yes. And I do want to explain what max out actually means. We use that term a lot. There are limits to how much you can invest in a 401(k) or an IRA in a given year. These limits are set by the IRS, by the Internal Revenue Service, and in 2024, the limit for a 401(k) is $23,000. For an IRA $7,000. But this is kind of cool, Bright. There's some good news for maybe some of our older investors. There's also what's known as a catch-up contribution limit. And for those who are later in their career, it's basically what it sounds like. So if you're 50 or older, as of 2024, you can contribute an additional $7,500 to a 401(k) each year. And for an IRA, you can contribute an additional $1,000. So if you feel a little behind on saving for retirement and you are old enough, we definitely want to take advantage of those catch-up contributions.

And no matter what your age is, if you can afford to max out a 401(k) and an IRA without compromising your ability to pay for the things you value, you may be really glad you did later in life.

Bright Dickson:

So to catch our listeners up on everything we've talked about so far, step one is to simply start saving. Talk with the folks in your company's HR department or contact the financial company in charge of servicing your company's 401(k) plan because they'll usually be able to connect you with someone who can help you get going and understand all of your plan options. You can also always tap a financial advisor to help you get started. Step two, save more as you're able and if you can, max out your retirement accounts every year. And now I think we're almost ready to get into step three, which involves some of that fine-tuning you mentioned earlier, Brian. But first, let's take a question from a listener and share some more mindset tips that can help you envision the retirement you want.

Brian Ford:

All right. Let's open up the inbox and see what we've got. Listeners, a reminder that you can email us directly, send us a note. That email address is Ask Bright and Brian at Truist dot com. We're looking for feedback on past episodes, suggestions for future episodes, and questions that we can answer on the show. Retirement and investing are topics that we get a lot of questions on, but we're not going to get to everything in today's episode, so definitely send us anything you want to know about that we didn't get to today.

But the email I want to respond to now is also about retirement and it reads, "Hey, Bright and Brian, my mother is 69 years old and just recently retired. She's healthy and in a good financial position, but this is the first time in her adult life she hasn't had a job to keep her busy. It seems like it's made her a bit anxious and she's not sure how to fill her days. What advice would you have for helping someone plan a retirement that isn't just financially comfortable, but mentally fulfilling too?" OK, so what do you think, Bright? How can people prepare themselves not just to retire, but be happy in retirement?

Bright Dickson:

That's such a great question, and there are a lot of studies out there that show that our listener’s mother is not alone in feeling adrift after retirement. We know that loneliness, depression, other mental health challenges can be a very real thing for people over the age of 65. There's one recent study, it's from the journal Nature Medicine, that shows that one of the best things that you can do for your mental health as a retiree is to get a hobby. And that hobby could be so many different things, but for many people, it often ends up being something around volunteerism, creativity, or athletics, or even some combination of all three of those. And what researchers have found is that people who have a hobby have better outcomes as they age. They're healthier, they live longer, they're more fulfilled, they're happier. So what I would suggest for this listener's mother is to find something that she really loves doing as a hobby.

Hobbies can fill some of that newfound free time, but they can really come with other benefits too. So hobbies can be a great way to socialize, to make friends, to stay engaged with a community. Maybe it's gardening, maybe it's a book club, maybe it's bird watching or some type of arts and crafts. The key is just to find something that you really intrinsically enjoy doing. And for our listeners out there who aren't retired yet, I'd share the same advice. Establish a hobby that you love, that you can do for the rest of your life, especially when you're not working anymore.

Brian Ford:

Solid advice. And I think we could almost think of it as another way to invest for retirement outside of our finances. So with a hobby, we're really investing in our interests to help find fulfillment when we do retire.

Bright Dickson:

Yeah, absolutely. And this kind of goes towards what we were talking about earlier, like envisioning the retirement and the future you want to have. And we talked about knowing the negative consequences of not saving for retirement, and that that in and of itself can be motivating, right? We could be motivated by trying to avoid a negative outcome, and that's like the whole smoking kills thing, right? Same idea. But we also know that envisioning the positive consequences of investing for retirement can be a pretty big motivator too. So Martin Seligman, who's a psychologist, and he is the director of the Penn Positive Psychology Center up in Philadelphia, he calls it prospection. So it's mentally evaluating possible futures, and that can fundamentally shape your motivation. So ask yourself, what kind of retirement do you want to have? How will you fill your days? What hobbies do you want to pursue?

Who's there with you, right? Where are you? What are you doing? How do you feel every day? What's your daily life like? You can write down your dreams, talk about them with the people you trust, you can build a vision board, whatever helps you envision that future and who you'll be when you're retired. Honestly, Brian, for forever, my vision of myself as an older woman has been that I'm going to have long gray hair and I'm going to put it in a braid. And I don't know why, Brian, that that is my vision for myself. I think it's because I have a belief that women who have braids just generally have their lives together, that's a belief that I have. We don't know the accuracy of that, but that's just a belief I have. But connecting with the future Bright in that way actually gets me excited and it helps me see it as a future reality and not just something that's in a time far, far away. Does that make sense?

Brian Ford:

Yeah. Yeah. I love that. And I think it's so true that when you start to envision your retirement lifestyle beyond hairstyle, it can start to feel more concrete. And I'll add one more important question that you'll want to ask yourself as you're envisioning your retirement, how can I make that lifestyle possible? So when you have that question in mind, you can make saving and investing decisions that will help set you up for that specific future.

Bright Dickson:

Thanks so much to that listener for writing in. Please keep the great questions coming. Again, that email address is AskBrightAndBrian@Truist.com. All right, Brian, for our last segment, do you want to talk some more about how you can fine-tune your retirement savings plan?

Brian Ford:

Let's do it.

Bright Dickson:

OK, Brian. So let's say our listeners have opened their 401(k)s and their IRAs, they're investing consistently and automatically, and maybe some of them are even maxing out their yearly retirement contributions, maybe they're even putting a little money into a brokerage account or an HSA just for good measure, and they've taken the time to think about what they want to do in retirement. What's next?

Brian Ford:

Yeah, what's next? How do we fine-tune? It reminds me of a story about my friend, close friend. He's a very bright guy. He's successful. He and his wife have four boys, and one day they realized there was a mouse in their house, and my friend and his sons, they became determined to catch this little critter. They put their heads together and came up with all these crazy contraptions. I'd need to draw almost like a diagram to really do it justice, but for our listeners, imagine a carefully perforated piece of paper on the top of a bucket with a piece of cheese on top with a little ramp going up to it, the idea being that the mouse would go for the cheese and then fall through the paper and it's then trapped in the bucket. Well, my friend and his boys put out this contraption one night and then went back to check it the next morning.

Cheese was gone, paper was ripped, no mouse. So they were like, "All right, we need to make some modifications to this invention." They tried again, same thing, no cheese, but no mouse. And then my friend got to work trying to think of some other way to refine his wild contraption even more, but while he's doing that, his wife gets impatient and goes to the store to buy a good old-fashioned mousetrap. And without the boys knowing, she sets it out one night. And what do you know? The mousetrap caught the mouse. And to this day, they still laugh about this, and they use this story in their family to teach a very valuable lesson, which is, we don't need to reinvent something that already works.

Bright Dickson:

If it ain't broke, don't fix it, right? I love that story, and I mean, just for the image of this family, like Wile E. Coyote style, building all these ridiculous traps. I love that.

Brian Ford:

Yes, I like that too. And when I teach classes, I use that story to set up what I call the five mousetraps of investing. And these are good things. And so if you've started saving for retirement, these mousetraps are going to serve you well. So let's take them in order, these five mousetraps. Mousetrap number one is, take a long-term view of your investments. This is especially true when you're investing for retirement. So when it comes to investing, short-term means anything five years or less. And the biggest mistake most people make with their investments is worrying too much about the short-term volatility. It can be very hard to watch your investments fluctuate in value, but taking a long-term view of their performance, it's going to settle your stomach somewhat. Take the long-term view and distance yourself from the chatter that thrives on television and newspapers. Social media and thinking long-term can also help you plan around inflation and what you'll need to do to keep up.

And it allows your investments to work the way they're meant to work long-term by giving them the time to even out market cycles. It can also keep you from investing on whims or following the latest fad, which almost always leads to poor investment returns. However, a long-term approach does not mean doing nothing for five years at a time. Each year, you should still review your goals and progress, and if you're investing outside of a target date fund, you should also evaluate your portfolio to assess your investments. It might be time to rebalance, and as you do that, you'll also be able to rebalance things to suit your goals, your time horizon, your risk tolerance, and so forth.

Bright Dickson:

OK, think long-term, but check in regularly. How about mousetrap number two?

Brian Ford:

Mousetrap number two is diversify, and that simply means to fund many different types of investments. With the target date funds, which we talked about earlier, that diversification is built in. But if you're more of a hands-on investor, you need to make sure you have a diverse portfolio. Mousetrap three is to implement systematic strategies, and that's just a fancy term for big picture, you have to remove emotions from your investment decision-making. Fear and greed tend to be the biggest problem emotions in this area, as they can drive many poor investment decisions. But when you have a strategic system in place like dollar cost averaging where you're investing a fixed amount of money at set intervals to help you weather the ups and downs of the market, you tend to have better outcomes.

Bright Dickson:

OK, good. So to recap, think long-term, diversify, and implement systematic strategies. Good. We've got two more mousetraps to go. What are they?

Brian Ford:

Number four is utilize tax advantaged retirement vehicles. We've already covered these. So when you're saving for retirement, use that 401(k), use that IRA. These are great investment vehicles with tax benefits designed to help you make the best of your retirement. An HSA, if you qualify for one, it also comes with some tax benefits as well. Now the fifth and final mousetrap is simple, keep expenses low, and that's based on a pretty simple fact. You don't get to keep what you pay in fees. I encourage all our listeners to seek out professional advice. I am a fan of working with a financial planner. I have one, but you also want to make sure you're getting what you pay for. Be mindful and try and get the right balance between quality advice, smart investment vehicles, and low fees.

So pay attention to the fees or expense ratio attached to any mutual fund or ETF. ETF is fancy for exchange-traded funds. But when you look at your mutual funds or your ETFs, you want to keep in mind the expense ratio that you're looking at, right? And you'll likely have to accept paying some fees, but when it comes to investing for your retirement, the barrier to entry shouldn't eat into your savings too much.

Bright Dickson:

See, this is why you're such a pro, Brian. You've got great advice on saving for retirement and catching mice. That's excellent. If we can switch to another animal really quickly, not to mix metaphors, but I want to bring up what might feel like an elephant in the room, and that's Social Security. I know we occasionally hear some doom and gloom over the future of Social Security, and I know it's also a really important resource for many people heading into retirement. So for our younger listeners especially, do you think they can count on getting Social Security payments when they retire?

Brian Ford:

I will say it gets a lot of headlines when someone says something like, "Social Security is going bankrupt and will not be available when you retire," Or something like that. And this type of misleading statement sounds dramatic, it gets attention, it sells ads, however, there's not a lot of evidence for it. If you ask most policy experts, they'll say Social Security will—it's most likely going to be around for many, many years. It's a benefit that a lot of people are counting on and will most likely have it in some form in the future. What is true is that Social Security is slowly running out of money, and because of this, it may look different when you retire than it does today, and that may mean you get less, or it may mean they raise the age at which you become eligible for Social Security, possibly both.

Right now, Bright, you can start receiving Social Security retirement benefits as early as age 62, although you'll get reduced payments if you start collecting before what's known as the full retirement age, and that's currently 67 years old. But the longer you wait to start receiving benefits, the monthly amount you receive will actually increase. Now all of that may change in the coming decades, but to say that Social Security won't be around at all, I just don't think that's going to be the case.

Bright Dickson:

Well, that's comforting to hear, Brian, and I hope you're right, and I really appreciate hearing that. I think there's plenty of bad information out there, so it's good to get a little positive reinforcement at times. One thing I will say for our listeners is that you should still be investing and saving for retirement with serious intention, right? So for one thing, whatever Social Security looks like in the future, those payments are probably not going to be enough on their own to live the life that you want in retirement.

Brian Ford:

Yeah, it's likely the case. Most likely Social Security, it's going to be there. It just may look a little different, and it can be an important complement to your savings, but you're still wanting to invest and save for retirement on your own. I think most people use those Social Security scare tactics to get a good outcome, which is to get us to save and invest on our own, but I don't think we need to lie to people to go down that route. But having said that, got to get going on our own, and then I think we use Social Security as that added little gravy on the top type of thing.

Bright Dickson:

And even beyond the practical aspect of that, taking your retirement into your own hands is a way that you can take more control of your life, right?

Brian Ford:

Yes.

Bright Dickson:

When you're zooming out back to what we always talk about, control what you can control, this is something you can control. You can't predict the future, but you can control what you do today to bring about the future you want, and investing for retirement is a huge way that you do that. And I think that for me is one of the big takeaways here, that we have control, this is something we can do, there are many ways to do it, the most important thing is that you get started and you do it.

Brian Ford:

Yes, I love that. So a top takeaway for me is worry less about the details of investing and start. Do everything you can to save and invest 15% of your income or more. Then after you've automated your investments and you're saving as much as you can, then you can fine-tune your investments with a planner. But for now, focus on increasing the amount you invest because your future self will be so thankful.

Bright Dickson:

That's going to do it for another episode of Money and Mindset with Bright and Brian. If you enjoyed the show, please drop us a rating or a review on the podcast platform of your choice. I know we say that every episode but it's really the biggest way you can help support the podcast. And if you want to get the word out by recommending it to a friend or a family member, please do that. We'd love that. You should also subscribe to the show, and if you have a question or something to share, especially a success story, we'd love those. Please send us a direct message at AskBrightAndBrian@Truist.com. We appreciate you listening. Thanks so much for joining us, and thanks to my trusty co-host, Brian Ford.

Brian Ford:

Thank you, Bright. For more tips and strategies on taking more control of your personal finances, you can always head to our companion website at Truist.com/money-mindset, or just try searching “Truist Money and Mindset” in your browser. I know we mentioned a few specific resources on retirement in this episode, and I want to give one shout-out to just another resource. It's a retirement savings calculator that lets you plug in your current savings, your annual contributions, and a few other data points to figure out how much money you'll have saved by the time you retire. You can play around with that and you can adjust those numbers to help you come up with a savings plan to hit your goals. We'll link that and those additional resources in the notes for today's episode. Thank you so much for listening. Until next time.

Speaker 3:

This episode of Money and Mindset with Bright and Brian is brought to you by Truist.