The earlier you start saving for retirement, the better. When you’re in your 20s, saving for retirement in your 20s may feel like it’s a long way off, but it’s one of the most important steps you can take to ensure that your later years are comfortable.
A GoBankingRates survey conducted in 2018 found that the majority of young millennials, referring to those who are between 18 and 24 years old, had less than $1000 saved, and nearly half hadn’t saved anything at all.
While many people put off saving until they reach their 30s, with today’s economy and the uncertainty of social security, if you wait, you’ll likely find yourself way behind when you reach retirement age. If you’re reading this now and you’re in your 20s, it’s not too late as these five ways can help get you started now.
Perhaps you’ll not only be able to save for retirement, but that land for sale in Michigan, or any place you’ve been eyeing, to build a home or use for recreational activities like fishing and hunting.
Start by Creating a Budget
If you don’t have a budget, you’ll be lost, kind of like trying to drive somewhere without GPS or a map. A budget not only helps you focus on your financial goals, but it can also help you see where you stand and put you on the best possible path for saving as much as you can.
During the process, remember the old adage: you always need to pay yourself first. That simply means whenever you have any income coming in, you should set aside a certain percentage for yourself which includes a portion saved toward retirement.
Be sure to include a separate account for emergencies as well, saving for unexpected expenses that inevitably occur or in the event you lose your job. That way you won’t have to touch your retirement savings.
Participate in a 401(k) at Work
If your employer offers a 401(k) retirement plan to take advantage of, do so. Most will match your contributions to encourage participation which increases your savings even more – it’s like free money in your pocket.
Plus, that money is automatically deposited before it’s taxed, so less of your income will be taxed which saves you even more. Try to contribute as much as you can, without leaving yourself strapped for cash.
Open a Roth IRA
If you don’t have the opportunity to sign up for a 401(k) retirement plan through your job, you can sign up for a Roth IRA. While it’s funded with money out of your paycheck that’s already been taxed, when it comes time to withdraw the money after retirement, it’ll be tax-free.
Don’t Let Debts Pile Up
If you’re already in debt, pay it off as quickly as possible. All that money you’re paying on credit cards and/or loans could be going into your retirement savings.
That means you’re losing not only the amount that you have to pay in interest but the amount of interest you could have earned if that money was invested. Of course, if you aren’t in debt, be extra cautious about spending any money you don’t really have.
Get in the Habit of Being Thrifty
While this one should be obvious, many people have a hard time controlling their spending, but the less you spend the more you’ll have for savings. It’s far easier to cut back on your spending than to try and find ways to earn more income. While you should be able to enjoy some of your hard-earned money now, look for ways to cut back wherever you can.
Do you really need the latest iPhone every time a new one comes out, or are you paying a lot of money each month for cable television that isn’t really necessary these days with so many other less expensive options?
The earlier you start saving for retirement, the better. When you’re in your 20s, saving for retirement in your 20s may feel like it’s a long way off, but it’s one of the most important steps you can take to ensure that your later years are comfortable.
What about you? Are you saving for retirement in your 20s? Any tips we missed?
