How I Started Saving for Retirement (Mistakes and All)

The short version: I started by making a preventable mistake in the retirement account I chose. Then I avoided dealing with that mistake for several years. Finally, I faced it, got back on track with a better account, and lived to tell the tale.

The Whole Story

About a year after I graduated from college, I started looking into retirement options. I did some research and thought a Roth IRA would be the best option, but I wasn’t 100% sure.

Around that same time, a friend referred me to a financial representative (Not a financial advisor. Big difference!) for a company he interned with. Running a music school was keeping me very busy, so I was grateful to have someone else advise me on how I should be investing my money.

We met and I set up the account the rep suggested, from the products available with his company.

Questionable Advice

It turns out, the advice I got was not great. It was OK, but not great.

Even though I wanted a Roth IRA, I let the rep talk me into getting different type of account, which I very quickly regretted.

It wasn’t an entirely bad product (and may have been the best one their company offered), but it was expensive to manage, given the very small amount I was able to invest at the time, and it just wasn’t the best for my situation.

Ignoring the Mistake

It seems crazy now, but once I realized my mistake, it gnawed at me.

Generally, I just avoided thinking about it, but every time I got a statement I felt a pit of negative emotions in my stomach. I had let myself fall prey to a slick sales presentation. (Stupidity.) I should be doing something about it. (Guilt.) There would be fees if I switched. (Financial pressure.) I didn’t know how much those fees would be. (Fear.)

For three years I harbored these feelings and avoided actually dealing with the mistake. (Three years!!!)

Finally, I got fed up and decided I was done with it. I would face it head on, whatever the consequences might be.

I went back to square one.

Getting Started (Again)

This time I did my research again. I read blogs (like The Simple Dollar) and talked to financially-savvy people who understood my situation and had nothing to gain from my decision.

Again, my research suggested that a Roth IRA would be the best option for me because of my age and income level.

I looked at online brokerages that offered well-managed Roth IRAs and chose one with a low expense ratio so my (initially) small investment would go as far as possible.

I still had some questions and wasn’t sure how to transfer the money from my old account, so I called (yeah, on a telephone) and the support staff walked me through the entire process. It was quick and painless (unlike the last three years of my life with the original account).

The last step was to set up automatic monthly contributions from my bank account to the new retirement account so I would stay on track with my savings goal.

Lessons Learned

I learned a lot through this experience.

I learned to do my research (and trust it!) and to make sure I’m relying on the right people to help me make financial decisions. It never hurts to run these decisions by a financially-savvy parent, relative or mentor who is older and wiser.
I also learned to not let guilt and fear paralyze me when I need to change course. It ended up costing me a few hundred dollars to pull my money out of the first account and switch it over to the new one, but I calculated that I would more than make up for this loss within 5 years by having the money in a less expensive account. I have a lot of years of saving ahead of me, so in the whole scheme of things, it was just not that big of a deal.
Finally, I learned to have perspective and be kind to myself. Looking back, I realize that the first account was not the catastrophic mistake I had made it out to be in my head. It may not have been the “optimal” choice for my situation (calm down, Perfectionist Andrea), but I was still saving somewhere, and that was the important thing. The real mistake would have been to not invest anything at all.

What fears and doubts are keeping your from taking the next steps in your finances?

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