Never Too Early: 4 Ways To Start Preparing For Retirement In Your 20s
For many people, saving for retirement isn't something that's on your mind in your early 20s. You may be just finishing school and settling into your first job, thinking you've got decades upon decades to worry about retirement planning. However, the sooner you start saving, the better off you'll be and the easier it will be. Believe it or not, there are quite a few simple and effective ways to start preparing for retirement in your 20s.
Learn About Your Options
Start by simply educating yourself on the options available to you. Are you currently employed? If so, talk to your employer about their retirement fund options, such as a 401(k). Not all companies offer them, but if they do, this could be a good option. If you're self-employed, on the other hand, explore possible retirement funds like the popular SEP-IRA. A simple meeting with a financial advisor can help you understand which plan is best for your situation.
Understand That a Little Goes a Long Way
In your 20s, you probably don't have a lot of money to throw around--even if you have a decent job. After all, this is a time when many people find themselves trying to get established and living on their own for the first time, in addition to possibly having hefty student loans to start paying off. However, even if you can only spare $100 per month (perhaps by cutting out that morning coffee at your favorite cafe), this will add up greatly over time due to compounding interest. In other words, don't put saving for retirement off until you can afford more; contribute what you can now and the results might surprise you.
Work With Your Employer
If you're interested in enrolling in your employer's retirement plan, ask them if they have an option to automatically deduct your retirement contributions from your paycheck, rather than making you transfer the money yourself. This way, the money will never hit your checking account, which means you won't be tempted to use it. Instead, it'll go straight into that retirement fund and you'll never even miss it.
Focus on Paying Off Debt First
Sometimes, the best thing you can do to prepare for your future is to pay off your existing debt before you can focus on saving. It might not be ideal, but living at home for an extra year or two could help you pay off those student loans, allowing you to be debt-free by the time you get out on your own. This will make saving for retirement much easier.