If you are in your twenties, congratulations. You have been given a tremendous opportunity.
Those in their twenties have the time to become retirement-ready. And a few simple decisions can help most twenty-somethings get off to a great start.
So whether you are in your twenties, or maybe have loved ones in their twenties, here are six retirement tips to consider:
- Start now. When it comes to retirement savings, time is your best friend. Time allows compounding to take place. If you are not familiar with the concept of compounding, check out this post. It is amazing what a little bit of money over a long period of time can do.
- Make it automatic. Each of us are prone to forget something every now and then. Fortunately, saving for retirement doesn’t have to be one of them. Avoid forgetfulness by setting up automatic contributions for your retirement account. If your employer offers a retirement account, like a 401(k) or 403(b), have the contribution withdrawn from your paycheck. If you have a personal retirement account, like an IRA, have the contribution withdrawn from your checking account.
- Take full advantage of “free money.” Some employers offer matches. A match is where employers contribute additional money, based on your contribution, into your retirement account. So let’s say you have a $50,000 salary, and your employer matches up to 5% of your salary. This means your employer will match your retirement contribution up to $2,500. Your $2,500 becomes $5,000. Don’t miss out on this “free money” (see Goodwin Barrett for more information).
- Stick with the basics. Certainly, you need to take on risk to get a good return. But don’t invest in anything that you don’t understand. An easy way to get behind with retirement savings is to go crazy with the types of investments you choose. If you are looking for a place to start, explore mutual and index funds.
- Make 15% your goal. Putting 15% of your salary into retirement savings has become the recommended standard for many financial experts. The earlier you choose to make this a part of your budget, the easier it will be to stick with it. Adjust your lifestyle expenditures now so that you can save is much simpler than later in life.
- Check out retirement calculators. How much will you need? Retirement calculators can help you understand what you will need at retirement and how much you should set aside to get there. Take 15-20 minutes and play around with a few retirement calculators. You will find yourself better understanding what decisions need to be made today for a retirement-ready tomorrow.
Those in their twenties have a great opportunity in regards to their retirement. They have what most of those who are facing retirement today need–time.
If you are in your twenties, take advantage of this opportunity. Develop wise habits for retirement. Retirement may seem far away for you. But talk to those who have already arrived. They will tell you that time moves fast. And you will be entering retirement before you know it, ready or not.