Baby Step 4: Invest 15% of Household Income for Retirement

Debt-free and equipped with your emergency fund, it’s time to make your money work for you. Baby Step 4 is about intentionally investing 15% of your household income—not just anywhere, but in the right order to maximize growth and freedom.

Why 15%?

Fifteen percent strikes the balance between living for today and securing tomorrow. It’s enough to grow into real wealth over time, thanks to compound interest, while leaving room for your lifestyle and other goals.

The My Wealth Life Investment Order

Here’s how to prioritize your 15% for maximum impact:

Company 401(k) up to the Match
If your employer matches contributions, this is free money. Always start here—it’s an instant return on your investment.
Roth 401(k) or Roth IRA
Roth accounts let your money grow tax-free. If your employer offers a Roth 401(k), take advantage. If not, open a Roth IRA and invest directly.
Health Savings Account (HSA)
If you’re eligible, an HSA is the most tax-advantaged account available. Contributions are tax-deductible, growth is tax-free, and qualified medical withdrawals are tax-free. It’s like a stealth retirement account with health benefits.
Taxable Investment Account or High-Yield Savings Account (HYSA)
Once the above accounts are maxed, continue investing in a brokerage account for flexibility. Or, if you need shorter-term goals covered, a HYSA offers safety and liquidity.

Example: Investing on a $50,000 Income

Let’s break down what Baby Step 4 looks like in action. Assume:

Household income: $50,000
Target investment (15%): $7,500 per year
Employer match: 50% up to 6% of salary (that’s up to $1,500 in free money)

Here’s how the plan could look:

Step	Account Type	Your Contribution	Employer Match	Total Added
1	401(k) up to 6% match	$3,000 (6% of $50,000)	$1,500	$4,500
2	Roth 401(k) / Roth IRA	$3,500	—	$3,500
3	HSA (if eligible)	$1,000	—	$1,000
Total Annual Contributions		$7,500	$1,500	$9,000

👉 With a salary of $50,000, investing 15% plus the company match means you’re actually putting $9,000 per year toward your future. Over decades, with compound growth, that can build into real wealth and freedom.

What to Invest In

Stick with a simple, diversified strategy:

Low-cost index funds or ETFs covering U.S. and international stocks
A mix of stocks and bonds depending on your risk tolerance and time horizon
Automated contributions so investing becomes a habit, not a decision

Invest with Purpose

Investing isn’t just about money—it’s about freedom. Every dollar you put away is buying your future lifestyle, your peace of mind, and your ability to live without financial fear. When you think of investing as buying back your time, motivation becomes automatic.

Takeaway

Baby Step 4 turns money into momentum. By investing 15% of your income in the right order, you’re building wealth with purpose, not just hoping it happens. This step is where your freedom begins to compound.