What is the best way to save for the future outside of a work retirement plan?

I am 27 years old and have finally worked myself into a well-paying job. I want to make the most of it by setting myself up for success down the road. I am currently investing into my thrift savings plan (TSP) once a month with the drill paycheck I receive for being in the National Guard and I also will be joining my company's retirement plan.

Other than these two methods of saving that I am currently contributing to, what is the best way for me to save for the future? I don't want to put all of my money into a standard savings account which will not grow much over time. Should I consider online savings accounts with higher interest rates? I am also intrigued by dollar-cost averaging. Should I consider index funds?

Banking, Financial Planning, Retirement, Investing, Mutual Funds
Sort By:
Most Helpful
3 weeks ago

At age 27 you should not be investing to earn interest.  You should be investing for growth.  The first thing you should do is set up regular 401K contributions.  These are pretax dollars and are often matched with contributions from your company.  You can deposit $18,000 per year and while that might be a lot for you now, do the most you can and get into the habit. 

If your well-paying job allows you to put away more than that, by all means do so -- into a regular (taxable) investment account.  Keep in mind that 401Ks are designed for retirement only, so they can be difficult and costly to tap in an emergency.  You should have other savings -- just please don't keep it in cash.

Put your nest egg into good-quality equity funds.  Equities will fluctuate in value and everyone gets scared of that, but don't let volatility scare you away.  Keep in mind that you are saving money for a time 40 years in the future.  If the market declines you will be able to buy more shares with the same money.  That will pay off, eventually.  You can't earn a good return on an interest-bearing account (even online) so don't hold any more cash than you absolutely have to (2-3 months' expenses at most).

3 weeks ago
3 weeks ago
3 weeks ago
2 weeks ago