Conservative ways to save for retirement?
A 401(k) is just a container. Like real-world containers (those that are usually made out of metal), you can put (almost) anything you want in it. Signing up for your employer's match is a great thing to do. Getting into the habit of saving a significant portion of your take-home pay early in your career is even better; doing so will put you lightyears ahead of lots of people by the time you approach retirement age. Even if you love your job, that will give you options you otherwise wouldn't have. There is no real reason why you can't start out by putting your retirement money in a short-term money-market fund within that 401(k). By doing so you will only earn a pittance, probably not even enough to keep up with inflation in today's economic environment, but at this point in your (savings and investment) career, that doesn't really matter much. What really matters is getting into the habit of setting that money aside every single time you get paid and not thinking much of it. And that's a lot easier if you start out early, especially at a time when you likely have received a significant net pay increase (salaried job vs college student). I know, everyone says to get the best return you can. But if you are just starting out, and feel the need to be conservative, then don't be afraid to at least start out that way. You can always rebalance into investment classes that have the potential for higher return -- and correspondingly higher volatility -- in a few years. In the meantime, you will have built a pretty nice capital that you can move into the stock market eventually. The exact rate of return you get in the first decade matters a lot less than how much money you set aside regularly and that you keep contributing. See for example Your Investment Plan Means Nothing If You Don’t Do This by Matt Becker (no affiliation), which illustrates how it takes 14 years for saving 5% at a consistent 10% return to beat saving 10% at a consistent 0% return. So look through what's being offered in terms of low-risk investments within that 401(k). Go ahead and pick a money-market fund or a bond fund if you want to start out easy. If it gets you into the habit of saving and sticking with it, then the overall return will beat the daylights out of the return you would get from a good stock market fund if you stop contributing after a year or two. Especially (but not only) if you do pick an interest-bearing investment, do make sure to pick one that has as low fees as you can possibly find for what you want, because otherwise the fees are going to eat a lot into your potential returns, benefiting the bank or investment house rather than yourself. Just keep an open mind, and very strongly consider shifting at least some of your investments into the stock market as you grow more comfortable over the next several years. You can always keep a portion of your money in various interest-bearing investments to act as a cushion in case the market slumps. "I didn't even have access to a 401(k) at age 24.  You're starting early and that's good.  You're frugal and that's good too.  Retirement savings is really intended to be a set it and forget it kind of arrangement.  You check in on it once a year, maybe adjust your contributions.   While I applaud your financial conservatism, you're really hamstringing your retirement if you're too conservative.  At age 24 you have a solid 30 years before retirement will even approach your radar and another 10 years after that before you have to plan your disbursements.  The daily, monthly, quarterly movements of your retirement account will have literally zero impact on your life.    There will be money market type savings accounts, bond funds, equity funds, and lifecycle funds.  The lifecycle fund rolls your contributions to favor bonds and other ""safer"" investments as you age. The funds available in retirement accounts will all carry something called an expense ratio.  This is the amount of money that the fund manager keeps for maintaining the fund.  Be mindful of the expense ratios even more than the published performance of the fund.  A low fee fund will typically have an expense ratio around 0.10%, or $1 per $1,000 per year in expense.  There will be more exotic funds targeting this or that segment, they can carry expense ratios nearing 1% and some even higher. It's smart to take advantage of your employer's match.  Personally, at age 24, at a minimum I would contribute the match to a low-fee S&P index fund." It has been hinted at in some other answers, but I want to say it explicitly: Volatility is not risk. Volatility is how much an investment goes up and down, risk is the chance that you will lose money. For example, stocks have relatively high volatility, but the risk that you will lose money over a 40 year period is virtually zero (in particular if you invest in index funds). Bonds, on the other hand, have basically no volatility (their cash flow is totally predictable if you trust the future of your government), but there is a significant risk that they will perform worse than stocks over a longer period. So, volatility equals risk only if you are day trading. A 401(k) is literally the opposite of that. For further reading: Never confuse risk and volatility Also, investing is not gambling. Gambling is bad because the odds are stacked against you. You need more than average luck to actually win and the longer you play, the more you will lose. Investing means buying productive capital that will produce further value. The odds are in your favor. Even if you do a moderately bad job at investing, the longer you stay, the more you will win. I'd say that because you are young, even the 'riskier' asset classes are not as risky as you think, for example, assuming conservatively that you only have 30 years to retirement, investing in stocks index might be a good option. In short term share prices are volatile and prone to bull and bear cycles but given enough time they have pretty much always outperformed any other asset classes. The key is not to be desperate to withdraw when an index is at the bottom. Some cycles can be 20 years, so when you need get nearer retirement you will need to diversify so that you can survive without selling low. Just make sure to pick an index tracker with low fees and you should be good to go. A word of warning is of course past performance is no indication of a future one, but if a diversified index tracker goes belly up for 20+ years, we are talking global calamity, in which case buy a shotgun and some canned food ;) Dividend reinvestment plans are a great option for some of your savings. By making small, regular investments, combined with reinvested dividends, you can accumulate a significant nest egg. Pick a medium to large cap company that looks to be around for the foreseeable future, such as JNJ, 3M, GE, or even Exxon. These companies typically raise their dividends every year or so, and this can be a significant portion of your long term gains. Plus, these programs are usually offered with miniscule fees. Also, have a go at the interest rate formulas contained in your favorite spreadsheet application. Calculate the FutureValue of a series of payments at various interest rates, to see what you can expect. While you cannot depend on earning a specific rate with a stock investment, a basic familiarity with the formula can help you determine a rate of return you should aim for. Buy gold, real coins not paper. And do not keep it in a bank.
"&gt; As I currently understand, we owe much of our national debt to ourselves.   Debtors owe creditors. Creditors are, by and large, the banks. Forget about we/ourselves.  One thing we are taught in school is that banks earn money on the spread between what a creditor pays, minus what a saver earns in interest on his deposit. In reality, such private savings pretty much do not exist. When someone borrows from the bank, they mostly aren't borrowing another person's savings. The bank is creating *new* currency through the issuance of debt.  &gt; The reason for this is that people are being charged interest that does not exist in the system.   I'm not sure what you mean by ""does not exist in the system"". The way it works is you borrow a dollar, and now you owe a dollar plus the interest on the dollar. Since each new loan creates more debt than currency, the monetary system can never shrink or it implodes. If you mean that the currency is unbacked by any objective measure of value, that is correct.   &gt; Therefore, if we tried to pay the debt (like some conservative politicians are fighting for) it would be a massive transfer of wealth from the 99% to the 1%, since most of the debt is owed to the 1% (banks).  There is no possibility of repaying it. Both the Red Team and the Blue Team are in on this. If you're worried about the 99% you should be advocating commodity money, because that is the only way to stop theft by inflation. If you're worried about yourself, get informed as to how these plans have played out in history and how you might protect yourself." The rule that I know is six months of income, stored in readily accessible savings (e.g. a savings or money market account).   Others have argued that it should be six months of expenses, which is of course easier to achieve.  I would recommend against that, partially because it is easier to achieve.  The other issue is that people are more prone to underestimate their expenses than their income.  Finally, if you base it on your current expenses, then budget for savings and have money left over, you often increase your expenses.  Sometimes obviously (e.g. a new car) and sometimes not (e.g. more restaurants or clubs).  Income increases are rarer and easier to see.   Either way, you can make that six months shorter or longer.  Six months is both feasible and capable of handling difficult emergencies.  Six years wouldn't be feasible.  One month wouldn't get you through a major emergency.   Examples of emergencies:   Your savings can be in any of multiple forms.  For example, someone was talking about buying real estate and renting it.  That's a form of savings, but it can be difficult to do withdrawals.  Stocks and bonds are better, but what if your emergency happens when the market is down?  Part of how emergency funds operate is that they are readily accessible.   Another issue is that a main goal of savings is to cover retirement.  So people put them in tax privileged retirement accounts.  The downside of that is that the money is not then available for emergencies without paying penalties.  You get benefits from retirement accounts but that's in exchange for limitations.   It's much easier to spend money than to save it.  There are many options and the world makes it easy to do.  Emergency funds make people really think about that portion of savings.  And thinking about saving before spending helps avoid situations where you shortchange savings.   Let's pretend that retirement accounts don't exist (perhaps they don't in your country).  Your savings is some mix of stocks and bonds.  You have a mortgaged house.  You've budgeted enough into stocks and bonds to cover retirement.  Now you have a major emergency.   As I understand your proposal, you would then take that money out of the stocks and bonds for retirement.  But then you no longer have enough for retirement.  Going forward, you will have to scrimp to get back on track.   An emergency fund says that you should do that scrimping early.  Because if you're used to spending any level of money, cutting that is painful.  But if you've only ever spent a certain level, not increasing it is much easier.  The longer you delay optional expenses, the less important they seem.   Scrimping beforehand also helps avoid the situation where the emergency happens at the end of your career.  It's one thing to scrimp for fifteen years at fifty.  What's your plan if you would have an emergency at sixty-five?  Or later?  Then you're reducing your living standard at retirement.   Now, maybe you save more than necessary.  It's not unknown.  But it's not typical either.  It is far more common to encounter someone who isn't saving enough than too much. "I can think of a few reasons for this. First, bonds are not as correlated with the stock market so having some in your portfolio will reduce volatility by a bit. This is nice because it makes you panic less about the value changes in your portfolio when the stock market is acting up, and I'm sure that fund managers would rather you make less money consistently then more money in a more volatile way.  Secondly, you never know when you might need that money, and since stock market crashes tend to be correlated with people losing their jobs, it would be really unfortunate to have to sell off stocks when they are under-priced due to market shenanigans. The bond portion of your portfolio would be more likely to be stable and easier to sell to help you get through a rough patch. I have some investment money I don't plan to touch for 20 years and I have the bond portion set to 5-10% since I might as well go for a ""high growth"" position, but if you're more conservative, and might make withdrawals, it's better to have more in bonds... I definitely will switch over more into bonds when I get ready to retire-- I'd rather have slow consistent payments for my retirement than lose a lot in an unexpected crash at a bad time!" This doesn't look particularly unreasonable, but a few notes: It's a little misleading to say that 45% of his paycheck is gone. Roughly 6% of his gross pay went to his 401(k). That money is still his; he's just chosen to save it in a particular way. Depending on the choices he's made for his retirement savings, he'll also reduce his tax bill right now and/or during retirement by making these contributions. Some of the other costs also go to social programs that may pay you back (granted, they may not always be as good as those in Europe, but it's not that you'd get nothing in return): In any case, $130K/year is certainly a lot on a global scale, but San Francisco is a very expensive city, and housing costs in SF have risen a lot lately. You've nicely summed up why a lot of families unfortunately leave the city. Try the Envelope Budgeting System. It is a pretty good system for managing your discretionary outflows. Also, be sure to pay yourself first. That means treat savings like an expense (mortgage, utilities, etc.) not an account you put money in when you have some left over. The problem is you NEVER seem to have anything leftover because most people's lifestyle adjusts to fit their income. The best way to do this is have the money automatically drafted each month without any action required on your part. An employer sponsored 401K is a great way to do this. Take a certain percentage of your income (say, 10%, but more is better if you can) and put it aside with every paycheck. Some employers will even allow you to direct deposit your paycheck into two different accounts and you can specify a certain amount or percentage for the second account. Your savings will go directly into a separate account as if you never had it in the first place. Consider your savings untouchable as spending money. Watch it grow. There's no other secret, you just have to do it! The range is fine. It's ~ 1-2X your annual income.  First, and foremost - your comment on the 401(k), not knowing the fees, is a red flag to me. The difference between low cost options (say sub .25%) and the high fees (over .75%) has a huge impact to your long term savings, and on the advice I'd give regarding maximizing the deposits.  At 26, you and your wife have about 20% of your income as savings. This is on the low side, in my opinion, but others suggest a year's salary by age 35 which implies you're not too far behind.  Given your income, you are most likely in the 25% federal bracket. I'd like you to research your 401(k) expenses, and if they are reasonable, maximise the deposit. If your wife has no 401(k) at work, she can deposit to an IRA, pre-tax.  It's wise to keep 6 months of expenses as liquid cash (or short term CDs) as an emergency fund in case of such things as a job layoff. They say to expect a month of job hunting for each $10K you make, so having even a year to find a new job isn't unheard of.  One thing to consider is to simply kill the mortgage. Before suggesting this, I'd ask what your risk tolerance is? If you took $100K and put it right into the S&P, would you worry every time you heard the market was down today? Or would you happily leave it there for the next 40 years? If you prefer safety, or at least less risk, paying off the mortgage will free up the monthly payment, and let you dollar cost average into the new investments over time. You'll have the experience of seeing your money grow and learn to withstand the volatility.  The car loan is a low rate, if you prefer to keep the mortgage for now, paying the car loan is still a guaranteed 3%, vs the near 0% the bank will give you. I'm looking for ways to geared to save for retirement, not general investment. Many mutual fund companies offer a range of target retirement funds for different retirement dates (usually in increments of 5 years). These are funds of funds, that is, a Target 2040 Fund, say, will be invested in five or six different stock and bond mutual funds offered by the same company. Over the years and as the target date approaches closer, the investment mix will change from extra weight given to stock mutual funds towards extra weight being given to bond mutual funds. The disadvantage to these funds is that the Target Fund charges its own expense ratio over and above the expense ratios charged by the mutual funds it invests in: you could do the same investments yourself (or pick your own mix and weighting of various funds) and save the extra expense ratio. However, over the years, as the Target Fund changes its mix, withdrawing money from the stock mutual funds and investing the proceeds into bond mutual funds, you do not have to pay taxes on the profits generated by these transactions except insofar as some part of the profits become distributions from the Target Fund itself. If you were doing the same transactions outside the Target Fund, you would be liable for taxes on the profits when you withdrew money from a stock fund and  invested the proceeds into the bond fund.