Posted on: 13 October 2020
When you're in your 20s, retirement seems like this far-off notion that you can barely relate to. But here's the thing — the 20-somethings who do spend a little time thinking about retirement are far better off when they do reach retirement age! You don't have to spend hours pouring over spreadsheets or meet with the nation's top financial planners (although meeting with one is a good idea), but you should at least follow these retirement planning tips.
1. Save something.
When you first enter the workforce, it is common for your income to be low and barely enough to cover the bills. Setting aside 10% or 15% of this income, as is often recommended, may not be feasible unless you live with three roommates and eat ramen noodles for dinner every night. But you should save something. The money you invest now has plenty of time to grow, so it would be a shame not to invest at all. Even if you can only spare $50 a month, that will make quite a difference by the time you retire.
2. Meet your match, if your employer offers one.
If your employer does offer a company match on your 401k, this means that for every dollar you contribute, they will also contribute a dollar. Usually, there is a limit on this. Some companies may match your contributions up to 3%, for example. Do your best to contribute up to the match limit, or else you're basically leaving money on the table.
3. As your income increases, so should your contributions.
For most people, their 20s is a decade of income increases. As you get promotions or move into better-paid roles, make sure you increase your retirement contributions before you make any other huge lifestyle changes. For example, if you were making $40,000 a year and get a raise to $50,000, you start contributing an extra $100 a month to retirement before you move into a bigger apartment.
4. Start learning, little by little.
For now, all you really need to do is stash money away in a retirement account. But as you grow older, you will need to make more decisions about that money, like where to invest it and when you should start pulling it out. If you read a little about retirement planning each week when you're in your 20s, you'll be pretty knowledgeable about the subject when it does come time to make more decisions.
You're young — and you should enjoy being young. But don't let youth be an excuse not to plan for the future. Future you is depending on present-day you for a healthy retirement. For more information, contact a retirement planning service.Share