Saturday, August 13, 2022

Planning Ahead: How To Save For Retirement In Your 20s

As you hit age 20, you are usually more concerned about finishing college, starting your career, raising a family, and living life to its fullest. In fact, retirement seems like nothing but an abstract concept at this point in your life.

However, before you know it, decades will have passed, and you will suddenly be much older and retiring from your job. To make sure you have the financial resources necessary to enjoy your retirement, this means you need to start saving for it while you are still young. 

To plan ahead and get the best results, here's how to start saving for retirement early in life.

Don't Procrastinate

Even if you have student loan payments, rent, and other expenses each month, don't let one excuse after another keep you from saving for your retirement. 

By closely examining your monthly budget, you should be able to find a way to save 5-15 percent of your income each month for retirement.

Sign Up for a 401(k)

If a 401(k) plan is offered as part of your benefits package, take full advantage of it and sign up to participate right away. In many situations, employers will match the contributions their workers make to these retirement plans, meaning you can gain substantial savings in a short time. 

If you consult with a money management firm about your retirement planning, you will also learn that a 401(k) lets your money grow tax-free until it is withdrawn at retirement, allowing your money to compound much faster each year.

Emphasize Aggressive Investments

To build up your portfolio wealth, emphasize aggressive investments by making stocks the primary part of your investment portfolio. 

Though the stock market can be volatile, it also has a great long-term track record. Once you buy and hold various blue-chip stocks, you should be able to build up quite a nest egg for retirement.

Set Up Automatic Deductions

If you are not eligible for a 401(k) plan at work, choose to open a Roth IRA on your own. Though the money you put into the IRA will have already been taxed, it will be tax-free when withdrawn for retirement. 

To make the most of your IRA, set up automatic monthly deductions from your paycheck, which will ensure your IRA continues to grow year after year.

By thinking about retirement when it is still decades away, you can formulate a sound financial plan that will have you enjoying retirement more than you ever thought possible.

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