Saving for retirement and the stock market in layman's terms

Hi! I am 25 (26 in a few weeks) and I've recently become terrified that I won't ever be able to retire. I think it's a fear many of my generation share (proud to be a weepy, entitled, wussifying America millennial). I'm lucky that my mother and her parents saved and so my mom will be able to retire comfortably and without bankrupting my brother and I. I do however know many boomers who have zero savings and are actively struggling and will work until they croak, bestowing their debt to their kids. I've been listening to money podcasts (Gaby Dunn's is great and funny, Motley Fool is v informative) and trying to figure out what I can do to start saving for retirement now, on a barista's wage with a little credit card debt and not much in a savings account that I frequently dip into. I recently made the jump and opened a retirement-specific account and here's what I've learned.

Start now! You should have a savings account with a little bit in it (people recommend 3-6 months of rent and the cost to live, although who tf has that?) and a whole separate account for retirement. You want both because a savings account is liquid, if you need it you can get it easily and you won't be penalized. A retirement account should not be cashed out until you are retiring and that money will be tied up in investments and harder to pull out. Most types of accounts will also penalize you pretty hard if you cash out early.

SO, there are three main types of retirement accounts, a 401(k), a Roth IRA and a Traditional IRA. Here are the differences as I understand them:
A 401K is offered through your job and is taxed on the way out, once you use it for retirement. This is nice now, but if you expect to be in a higher tax bracket when you are retirement-age, this can hurt a lot. The benefit to a 401K really depends on your company. Some companies will match your contributions and that is DOPE. If your job does that, open one asap and put as much as you can in it! You can have a little bit automatically taken from your paycheck each pay period so it won't hurt that much. That money is then held for you, accruing interest or invested for you, hopefully turning into more money. One common misconception, if you quit, you don't lose the money! Some places let you keep it there, otherwise you can "roll" it into a different retirement account (typically a Roth or traditional IRA) or you can cash it out (don't!).

A Traditional IRA is an individual retirement agreement/account. You need to be employed to open one of these, but it is independent of your employer. This is a separate account that you put money in and then must invest. If you don't invest it, the money is just sitting in a "tax shelter" not turning into anymore money. You want it to turn into more money. This money is also taxed on the way out, so good if you are rich now and will be poor later or are starting to save closer to retirement age. I'll go over how to invest later!

A Roth IRA is the same as above except the money is taxed on the way in. This is good if you are like me and poor now, but plan to be better off later. That means that I am paying taxes on the money now, while in a poverty-level tax bracket, and won't have to pay taxes when I use the money and am a successful, hopefully 6 figure making, retiring nurse practitioner (we'll see). This is tight. So, same as traditional, it is a tax shelter and the money needs to be invested to turn into more money. The earlier in life you start, the more aggressive and risky you can be with your investments, because the markets are always dropping and rising and blah blah whatever that means. I had my mom email her "finance guy" who suggested I open a Roth. My research showed the same so I guess I'm good. I opened one with my current bank because they offered moderately low fees and cost per trade/commission. Whatever. Also, their minimum account balance was $500 and I intended to start with $1000.

Now, investing! I was told that a common rule of thumb is to subtract your age from 100 and that is the percentage you should invest in stocks and ETFs (?) and the remaining should go to more stable investments such as bonds. I still don't really know the difference but it seems that stocks and ETFs are riskier and will rise and fall with the market, but bonds are more stable. So I rounded down to 20 years old bc I wish I was still 20 and decided to allocate 80% to stocks and 20% to bonds. Oh right, first I emptied my savings account into the Roth so I had some money to put into the stock market, woo! It was $1000. Now what the hell to invest in? I work in a coffee shop on the ground floor of a gigantic office building that houses many finance firms so I occasionally get free financial advice from old men. Of course I did my own research as well, but I kept coming back to "index funds". These are little bundles of a bunch of the stocks and typically mirror the market as a whole. If the market drops, so will your investment. If it rises, so will your shares. This way, you own a little piece of the top 500+ stocks. Ones that I purchased and were recommended to me: S&P 500 (top 500 companies), VTI (Vanguard total index, similar but somehow different to S&P) and AGG (something aggregate, so also similar but different to S&P and VTI). These stocks typically follow each other but every once in a while one will go up while the other has dropped. After buying those shares, I had a hundred or so left so I decided to invest in something I believe in. For me, it was legal pot. For you it may be an up and coming company or something else. I've heard that investing in stuff that old people like is a good bet because of all of the baby boomers coming into retirement age. Idk! Have fun! And put as much money as you can into this account each month and keep reinvesting that money. Also, don't check your account or the markets too much, apparently that is stressful and bad and not productive. What I personally can afford is $100 to savings, $100 to my IRA and $100 to my credit card each month. And sometimes I can't do that much and it's okay. Because anything is better than nothing.

I hope this has helped you and I hope this is accurate otherwise we're both fucked. Byyyeee!