Now you've laid the foundation for Baby Step 4. You've paid off your consumer debt and have your fully funded emergency fund in place, so it's time to invest 15% of your household income for retirement.
Why this step matters
If you’ve ever felt anxious about saving for retirement, you’re not alone. We all like the thought of not having to worry about money as we get into the golden years/travel/spoil the grandkids stage. Baby Step 4 is where the journey to get there really starts. With no payments draining your income and a solid safety net in place, you can now focus on building long-term wealth and preparing for your future.
How to get started
Invest 15% of your gross household income consistently and over time (there's no shortcut at this stage). The approach here is to start with a 401(k) if your company matches, and contribute up to the match. Then go for the Roth IRA. If you max that out, then other options include a traditional IRA, or going back to the 401(k) and bumping up the contribution until you get to the 15%.
If you're unsure where or how to invest, EveryDollar connects you with trusted investing pros who can help create a retirement plan that aligns with your goals.
Pro Tip: The longer you invest, the more money you can earn in later investing years thanks to compounding interest.
Next Steps
Head to Baby Step 5 and start saving for your kids' college fund (if you have kids).