I’m 23.5 years old, and I’m preparing for retirement. Some of my college friends think I’m crazy. Sometimes, I think the same thing too =).

Since graduating college, the last several months have been spent browsing the internet for any and all information I could find about financial responsibility. I was particularly interested in learning how to build my nest egg. After receiving my first paycheck and losing a crap load of money to taxes, I was even more motivated to setup my 401k to avoid some tax. I wanted to max it out! Well, after further evaluation, this wasn’t the best thing for me to do…

From my research, I found that most of the information online was geared toward a broad audience of young professionals. Although that is great for the website, the information wasn’t specific enough for my own personal finance needs. Through continued research, I think I’ve determined what I should do. Without getting into too much specific detail, I’ll reveal some background information about my financial status.

  1. I am currently in the 25% US Federal Tax Bracket (as defined this year), and will break into the 28% Tax Bracket in 2010 if I choose to stay with my current employer.
  2. I do not receive a 401k Match, but my employer does provide a “retirement fund” that I earn every year.

At 23.5 years of age, I will have a whooping 36 years before I can access the money I place into a 401k. Now, some of you may think this is great. But to me (no offense to the older readers), 36 freakin years is longer than I’ve been alive… WHA!? And, at 59.5 years of age, I would hope that I could still be employed… preferably as a top executive in a great company (fingers crossed). Also considering future advances in medicine along with my desire to be healthy, I plan to live for quite a while… The point I’m making is that by the time I reach retirement age and beyond, I hope to still have a source of income in addition to my nest egg. Ideally, I would have the option to retire, but prefer to work for a company I love. This remains to be seen…

With such a long time to go, I have to balance between wanting to have fun with my money now, and wanting to have enough to raise a family tomorrow.

So here is what I plan to do. Please share your opinion if you think I’m a total lunatic… I need all the help I can get =)

  1. 11% of my gross income will be invested in stocks, with a mix of conservative and risky investments. I tend to be a much more conservative investor preferring to hold stocks for at least two years in value companies. However, given my young age, I can tolerate a fair amount of risk and will slightly shift my investment style toward risker companies. Additionally, this money is somewhat liquid since I can sell my shares and retrieve the money if necessary.
  2. I will max my Roth IRA for the year. Since I don’t get a 401K match and I’m likely to reach the next tax bracket, it seems to make sense to get taxed now with the Roth IRA. And, from what I understand, I can use my principal investment in the Roth IRA to leverage buying a home in the future.
  3. 10% of my gross income will go into my 401K. For every dollar I invest, I only feel 75 cents of it in my paycheck. This percentage feels fair enough for me to enjoy the immediate savings from tax, while still having money left over to enjoy my youth.
  4. The rest of my money will be placed in my checking account and a high yield savings account. I still have to find a savings account since I’ve officially denounced Emigrant Direct last month (will write about this later). This remaining amount will cover my monthly bills, provide for an emergency fund, and provide some “fun” money.

As my income rises and personal priorities change, the nest egg mix I outlined above will adjust accordingly. I can see myself placing more money in the stock market as my earnings grow.

Overall, I hope my net worth finds the miracle of compound interest!