Retirement plans – is it too soon to start?
The beginning of a career is a time for new things. For many, it’s the first time taking home a sizeable paycheck. While learning to manage money and pay off current debts may be at the top of a young professional’s list, thinking about a retirement plan tends to fall at the bottom. There’s no doubt, retirement seems like a lifetime away. But when the time comes, you look back and wonder why you didn’t plan better.
So, why start early? Here’s the reality on planning early for retirement. Younger generations never take it seriously enough, and women especially don’t start soon enough. We either don’t start one when we should or we don’t do our homework to learn how to invest correctly. If a person started a retirement plan at age 23 versus age 30, it could nearly double their money or contributions. Serious business.
While it may seem overwhelming, getting a head start on your retirement plan is relatively simple. With the right steps and a conscious effort, here’s how to begin your savings.
1. Develop a savings habit.
It’s the simplest step toward setting yourself up for financial success. Whatever you are able to tuck away, set aside that amount of money per month or week. A good start is to put 10 percent of your income toward retirement. If that’s too much, start smaller. This number can increase as you get older, but everyone has to start somewhere. It doesn’t necessarily matter how much you are saving, just as long as it is attainable and you are developing the habit.
2. Create a retirement plan.
Having a retirement plan in place is crucial for achieving the future you envision. It’s not just about setting aside money; it’s also about defining what you want your retirement to look like. For instance, you might dream of traveling and exploring new places, so your plan should include saving for travel expenses and activities. On the other hand, if you are looking forward to a more comfortable lifestyle in your later years, you might consider moving to an assisted living community, like ridgefield crossing, or another place that suits your needs. Planning for these possibilities can ensure that you will have the financial resources to make them a reality. By outlining your goals and incorporating them into your savings strategy, you can more effectively manage your finances and build a retirement plan that supports your aspirations and needs.
3. Take advantage of your company’s 401(k) plan.
If your company offers a 401(k) plan, take advantage of it. If your company has any sort of 401(k) match program, that is basically free money. Enroll in the program sooner than later. Fewer companies offer a complete match, but even 50 percent is decent. This plan rolls over, so even if you change jobs, the 401(k) stays with you. The rules may change per employer, but the bottom line is 401(k) plans with matching options are good. Use them.
4. Invest in a Roth IRA.
If your company doesn’t offer 401(k) or if you work for yourself, a Roth IRA or similar retirement savings fund is your best bet. Roth IRAs are especially appealing to young professionals because you are taxed only on what you put in (not on the accrued earnings) as opposed to a traditional IRA, where taxes are taken out at the end on both contributions and earnings. Remember, “hands off” is the best rule of thumb for any IRA or savings fund. You can double your retirement savings efforts by opening a Roth IRA in addition to a 401(k).
It is never too soon so start saving for retirement. While there’s no silver bullet for the best retirement plan, any effort in planning for financial wellbeing will put you in good standing.
What is your advice for starting a retirement plan?
