How to Start Planning for Retirement in Your 20s
Retirement
For most youths, planning for retirement in their 20s is not a priority. It’s hard to think about retirement when you are excited to start building and advancing your career.
But starting to plan and build wealth for retirement early enough is essential as it gives you time to maximize the compound interest.
Here are five tips to help you start saving in your 20s.
Start Now
When you think about saving money, you will probably come up with hundreds of reasons why it seems impossible- it could be student loans, you need to pay for health insurance, or even covering rent.
However, allowing your expenses to become an excuse as to why you can’t save is a huge mistake.
Look at your budget and find areas you can cut down on your spending. Ensure you always try to save at least 10% of your total income.
Have an Emergency Fund
Building an emergency fund will help you avoid relying on credit cards or your retirement savings for any unexpected expenses.
You may need some money for a car repair or a new phone, and an emergency fund will come in handy during such situations.
Live Within Your Means
Today, most young people are vulnerable to lifestyle creep trying to live lifestyles they can’t afford.
This puts a strain on their finances and increases their reliance on credit cards and other bad debts.
Don’t buy a car you can’t afford to service, don’t move into a house for the status quo, or go on expensive holidays for Instagram likes.
Look at your financial situation before doing something and ensure it is within your budget.
Living within your means will help you better plan your finances and save for retirement.
Educate Yourself About Money
When you’re just starting on your own, many things can be distracting, such as a new job, dating, and the many confusing money concepts.
If your parents never taught you about money, it’s time to start educating yourself.
Start by learning how to invest your money, how to set up an emergency fund, and how to start saving for retirement.
Learning how to manage your money is an essential skill that every adult should have.
You can also consult a certified financial planner like David Laut, near you.
Sign Up for Your 401(K)
Sign up for your 401(K) at work if you’re eligible to do so. After signing up, the money will be automatically deposited into the plan before taxation.
This means that less of your income will be taxed now- the government is even giving you a tax break to encourage you to save for retirement.
When you are in your 20s, retirement seems like something that will never come.
Most young adults today don’t understand the importance of saving for retirement- why should you save for something 40 years away?
However, if you want to retire someday, start saving for it now.
Category: Retirement
