2006 Makeover, Step #4: Open your retirement accounts

Ramit Sethi

Oh, in case you didn’t catch it over the weekend…the 4th step in the 2006 financial makeover is about opening your retirement accounts. Check out The World’s Easiest Guide To Understanding Retirement Accounts.


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  1. Justine


    I just started reading your steps and I’m starting to follow them. Thanks!! I have a couple of questions. When you say to put 20% of your income towards savings does that include the amount going towards retirement? I am currently maxing out my 401(k) so that’s 15%. Also, I assume the max of $95,000 for a Roth includes overtime and bonus pay, right? (I feel like that may be a stupid question, but want to make sure). If you’re not eligible for a Roth, what suggestions would you have? Thanks so much. Your information is really invaluable.

  2. GHoosdum

    Thanks for the kick in the pants, Ramit. I consider my situation as pretty decent on the retirement account front, because I’ve been socking money away in my 401k since I was 19 (I’m now 26). However, your post was just the impetus I needed to get that Roth IRA started. I’m now putting about 15% of my income into various savings vehicles, and my wife and I don’t notice the lack. Monthly spending truly does adjust to meet incomes, and in a perverse way, it’s a great feeling to decrease my monthly “income”.

  3. Ben

    I came across this site yesterday and I’m starting to put your advice into action. I’m setting up a higher interest account for short term savings as well as Roth IRA. I’ll probably start with something like the Vanguard Index Fund and go from there.

    Great site and great information!

  4. thrillhouse

    “makeover” eh, Ramit? Sort of a money makeover? More comprehensive than that? My bad. A Total Money Makeover, maybe? At least try to be original –

  5. Ramit Sethi

    Uh, I didn’t even think about his stuff before doing my makeover, and the word fit. And now that you point it out, I’m pretty sure Dave Ramsey doesn’t own the word “makeover.”

  6. thrillhouse

    its cool, don’t sweat it, Ramit – his stuff is much better anyways + its actually proven to work

  7. candice

    Hi Ramit,
    I’m new to your blog and I’m really enjoying it. Not sure if my question fits into this “makeover” series but I had to ask . . .

    I have been out of school for a few years now (I am 26). Although I try to stay on top of planning for my future, I don’t have much to show for it other than meeting my employer’s modest match on my SIMPLE IRA (through Schwab, have no idea how to invest the money, I’ll have to comb through your blog for inspiration).

    In Korean culture it’s understood that your children will take care of you when you stop working.

    My parents, who have made their living running small retail spaces since they moved to America, have never been able to save much or plan for retirement.

    I am an only child so all eyes are on me!

    To be completely honest I am starting to get REALLY worried about how I will make/save enough to support them when they reach retirement age (ideally within the next 5-10 years).

    I know this is something that might seem so completely foreign to some of your readers (I realize many people just don’t have that kind of relationship with their parents) but it seems like a looming responsibility that many people fail to adequately prepare for.

    I have no idea where to start!

  8. TTFK

    This is one piece of advice I took to heart this year.

    I’m solidly lower-middle class, having made almost exactly $30K last year. Well, actually 40K, but 10K of that was a Powerball windfall that I used to pay off almost all my debts.

    I made the usual young-stupid mistake of cashing out miniscule 401Ks from past jobs. This time around, I was putting 3% in my SIMPLE-IRA just to get the matching.

    After reading this article, I opened up a Roth and deposited my first $333.33 into it. Also, I had HR double my SIMPLE-IRA contribution from 3% to 6%.

    6% of $30,000 isn’t a ton, but better late than never…

  9. Ryan


    Thanks for the advice, which unlike Dave Ramsey’s is free and doesn’t make any predictions about future performance to lure readers. Anyone interested in him would be better off spending a hour with a financial planner for the same price.

    I appreciate that your focus does not deviate from saving and budgeting into “playing the market”. I agree this has little impact on the final outcome and confuses and discourages new investors.

    Well worth the read.