Despite the honors and AP classes that I was enrolled in throughout primary, secondary, and undergraduate schooling, I am a slow learner. Like, embarrassingly slow. But, I can say wholeheartedly that I have finally and officially learned that a certificate of deposit at my bank is no place for my Roth IRA. Is that a slow clap I hear? Yeah, I didn’t think so.
Let’s get some backstory here. When I was a wee thing, my dad opened an IRA for me. Every year, he helped me squirrel away a tiny chunk of change. It didn’t amount to much, but by the time I started college, I had a few thousand dollars in an IRA, along with a glimmer of understanding about saving for retirement.
Now that I am a teacher with a pension, I opted to fund a Roth IRA for my retirement savings.* For eight years, I have contributed to my Roth IRA. The past two years, I’ve managed to fully fund it. I sound like a freaking genius, right? Here’s the problem. This whole time, I’ve kept my money in a certificate of deposit earning a whopping 0.5% this past year. I’m losing money if you factor in inflation. I know, I know. But I already said I’m a slow learner.
The reality of it is that I am cautious and anxious to a fault. The amount of time I spend obsessing over decisions would lead a bystander to believe I am determining the course of the free world, not ordering Chinese food takeout. And if I make what I later determine to be the wrong decision, look out. I have been known to second guess myself for
days weeks months decades. I’m working on it.
Last year, things changed. I had spent a decent amount of time lurking in the personal finance blogosphere and frantically reading every finance book I could get my hands on at the library. I knew it was an insult to my savings to leave my money earning such a pittance in my bank, but my goodness did I love seeing the words federally-insured next to those dollars. Still, it was an illusion. The only thing I was ensuring was the fact that my money wouldn’t ever amount to much.
So I decided to do an experiment. I would take two-thirds of my Roth IRA and move it into a Target Retirement Fund with Vanguard. I couldn’t bring myself to move it all. What if the market crashed? What if I lost everything? Could I owe the stock market money? I wondered.** At the end of the year, I would compare my experience with Vanguard to my certificate of deposit. Then, I would decide.
November 1, 2015 marked the end of that year. That meant I had a ten-day grace period to make my move. And even though my Vanguard account spent almost equal time in the red and the green, even though the market really did tank, even though I may have called my dad crying a few times, I made the switch this week. Put up or shut up, right? All of my Roth IRA funds are in my Target Retirement Account because I finally learned my lesson.
Here’s the lesson:
I only earned 0.5% interest on my CD last year. That netted me less than 150 measly dollars.
- Switching car insurance companies earns me more money in one phone call.
- Tutoring earns me more money in four hours.
- Couponing saves me more money in two weeks.
- Reselling and decluttering earns me more money in a month.
- Switching out bulbs and air drying my clothes saves me more money in a year.
I know I am young and could invest more aggressively. I know that I could probably find more savings options for teachers that don’t totally suck. I know that people are reading this post right now tut-tutting to themselves, thinking, “Poor girl, doesn’t have a clue.”
I’m not an expert at investing. I’m so far from one that it’s laughable. But I’m investing. My palms might be sweaty, and I might white-knuckle my mouse when I click on my account, but I’m doing it. I hope to put more money in the market by the end of the year, but a Roth IRA that is now more properly invested and has been fully-funded for the past two years seems like a pretty solid place to start.
*Don’t get me started on how bad our 403b sucks. The fees, the limited options, the fact that my district can’t even be bothered to update the info page. Yeeesh.
**Shake your head. I know, what a noob I was.
So Tell Me…What made you so quick to invest? What advice would you give a fledgling investor or someone who hasn’t decided to invest at all yet?