Many financial advisors recommend that you begin saving for your retirement in your 20s because you'll benefit from decades of compound growth, save money on taxes, and maximize the amount of employer contributions you capture. However, it's common for young adults to put off saving for retirement because it's an event that is so far into their future. The fact is, if you're in your 20s, you should start saving for your retirement immediately -- you'll be thankful that you started early when you reach retirement age. So check out these tips to learn how you can make saving money for retirement simple.
Start a 401K
You should start a 401k through your employer as soon as you're eligible. A lot of employers match part or all of 401k contributions that employees make, which is just free money that for you to use later in life. Before you sign up for your employer's 401k plan, make sure you know how much of your contributions are matched. The matched amount varies, depending on your employer, but it's common for employers to make a $0.50 contribution for every dollar that you contribute, up to six percent of your annual pay.
By starting a retirement fund while you're in your 20s, you can afford to be a bit more aggressive with your investments. After all, if one particular investment doesn't work out, you still have plenty of time to recover your losses. Keep in mind that understanding the stock market isn't easy. So before you invest a portion of your money in stocks instead of savings bonds, you should speak to a financial advisor with experience in diversified portfolios. This way, you don't gamble away your life's savings on a horrible investment.
Learn About Investments
Don't rely on your financial advisor to make all of your financial decisions for you. It's important that you understand where your money is going and how each decision that's made if benefiting you. When you're discussing different options with your financial advisor, make sure he or she explains to you why one investment is recommended over others, and take the time to learn as much as you can about investing your money on your own.
When you're older, you probably won't spend much time worrying about investment fees. However, when the investment spans a 30-year period, investment fees can really impact the growth of the investment. Before you agree to make an investment, talk to your financial advisor about any fees associated with the investment so that you understand how they will impact your money in the future.
When it comes to saving money for retirement, the sooner you start saving the better. Don't wait until you're nearing retirement age to start worrying about how you will afford to maintain the lifestyle to which you've become accustomed. Instead, make an appointment to speak with a financial advisor so that you can begin saving money for your retirement while you're still young.
To talk to a financial advisor, contact a company such as Wealth Builder Advisor.