My friend in the US (I don't live there permanently) has a Youth who has started work as a teen while at school/college ("at Starbucks" type of thing) and we were discussing the various ways such a Youth should begin Saving For Retirement. What I mean is in the government sanctioned tax-advantaged manner(s) available in that country.
I actually (A) know nothing about this (I hear the usual terms "401" etc), (B) I trust this list more than Friend :) and (C) surprisingly .. I really couldn't find a concise, appropriate, summary of this on the internet. (If I'm wrong, bad me.) (I think a lot of the explanations for US folks just "assume obvious stuff US folks would know" if you see what I mean.)
- Youth is about 18 presently
- Youth will/should initially save (IMO) say $50-$100 a week to retirement system (for now she makes the typical teen income, some couple hundred $ a week), obviously growing later when she is a normal employed adult
- Youth has already established correctly a normal bank account (sensibly a local credit union, knows how to use it etc), bravo
- Unfortunately Youth has been working for 6 months or so already and has not yet started (hence this urgent question!)
- Youth is a Female Youth so conceivably could get married later; seems like a factor?
- I can't imagine investing this in anything but the cheapest-fee possible S&P index fund. But. Could there be something to be said for some sort of system (is this possible?) where it's basically in a brokerage account and Youth (or Eagle-Eyed Parent, or Uncle Fattie) could keep an eye on the positions being sensible?
- How do you mechanically do this (in the US?) Is it like a government function or something and the money goes through some gov't department? Do you basically open a brokerage account and tick a box "401" (or one of those abbreviations)? Or what?
What is it you have to "do" in Usa to "start one of the retirement systems"?
- As with my family, they are a bit "internationalized" so there is some chance that Youth, when she is say 40 or such (ie well before retirement), will suddenly leave the USA, move to Korea or something and never return so, is that a special consideration? Is there options to, and/or must one never, "break out" of the system (perhaps taking a tax hit then?) or?
And one from me
- In the USA, is there any thinking that you should just "ignore" the tax advantaged systems (whatever they are) and just invest raw (ie presumably after paying income tax each year) and presumably just cough up the cap gains in the Future when you retire? Or is it "too good to ignore!"?