I have a good friend who lives in the states who is looking to get serious about her retirement saving. She wants to put about $250 / month into a 403K (tax sheltered retirement savings at a non-profit, like a 401K or an RRSP). She’s read some investing books, but isn’t really interested in the subject and often finds them confusing.
She’s been looking for a vehicle she can set up, pay into every month and ignore (with as little monthly / annual maintenance as possible). She’ll be looking to start cashing it in when she retires in 3 decades or so.
Originally I was advocating buying “dividend aristocrats” that have a high yield, but obviously this takes research and more of an ongoing awareness (how are the businesses you own doing these days?). Also, there’s definitely a risk in having your retirement savings concentrated on a handful of companies (even if they’re great long-term companies).
Instead, I’ve recommended Vanguard’s Balanced Fund (60% equities in broad US market index, 40% bond funds – 0.2% MER, 9.34% average return over the last 5 year) as a way to put money away, not worry about it, and expect to have a nice nest egg to retire from. She would buy this on auto-pilot, and ignore it.
Given that the bulk of this blog’s readers are clearly smarter then I am, would you agree with this recommendation? Any alternatives you’d encourage her to consider? For Canadians, what would your retirement savings look like if you lived in America?
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