Twenty Somethings and Retirement
Start planning for your retirement in your 20s!
Let’s face it: at 20 the last thing on your mind is retirement. A majority of twenty somethings probably do not know the difference between a traditional or a Roth and that may be a problem. Starting to save for retirement in your twenties is one of the best finical decisions you may make in your life.
So where do you begin if you fall into this category? Easy, save! Maybe you start saving wherever you can, a little here and a little there. It doesn’t have to be a ginormous amount, start saving small and save often. Lucky for you time is on your side and by saving now you are able to watch your retirement fund grow. Developing good saving habits now will help you to continue to save throughout your life.
You may want to look and see if your current employer offers a 401(k) plan to help establish your retirement fund. Not sure what a 401(k) is? Put simply it is your employer paying you to setup a retirement account. One of the best ways to think about a 401(k) is your employer leaving you free money for you on the table. You decide how much money you would like to save in your account and your employer matches the amount to a certain percentage. Sounds almost too good to be true, right?
Another option you may want to consider is an Individual Retirement Account better known as an IRA. This type of retirement plan is not set up through your employer but rather through yourself. With an IRA you able to put up to $5000 or $6000 in your account per year and allow your retirement savings to grow tax-deferred. There are two different types of IRAs and 401(k) s: traditional and Roth. To read more about the various retirement plans check out the article “Are You Taking Advantage of the Right Retirement Plan?”
Maybe you do not know the exact age you would like to retire at yet and that’s fine. But having somewhat of an idea doesn’t hurt either. Using a retirement calculator can help you visually understand and see what it may possibly take for you to retire. Once you do this maybe now you can begin developing a budget for your future retirement. Designing a budget will not only help you plan for the future but it will also help you know where your money is going and keep you on the right path.
Staying on top of your debt in your twenties may greatly benefit you in the long road to retirement as well. Paying off credit card bills maybe hard at times but in the end it may be something you are glad you did. Interest rates on credit cards are expensive in general and tend to grow as time goes on. Paying off those bills now will only help you grow your savings for retirement later in life.
Continuing to stay educated on your finances will help you get a better grip on retirement and understand what it takes to retire. Whether it is taking a finance class at your local community college, reading up on retirement online or even talking to one of BCU’s Financial Advisors, it never hurts to stay informed about your financial goals.