Many people put off saving for their retirement while they are young because they think that they still have plenty of time to save money. However, a good financial planner will tell you that by beginning to save for your retirement in your 20s, you'll save money on your taxes, benefit from decades of compound growth, and capture as many employer contributions as possible. The fact is, if you're in your 20s, it's the perfect time for you to start saving for your retirement. Check out these tips to learn how to make saving for your retirement simple.
Start a 401K
As soon as you're eligible, start a 401k. You do this through your employer, and the money for your 401K is withheld from your paycheck. Many employers even match 401k contributions made by employees, so make sure you know how much of the amount you deposit into your 401k is matched. The amount can vary, but typically employers match $0.50 for every dollar that you put into your 401k, up to six percent of your pay.
The great thing about starting your retirement fund in your 20s is that you can afford to be a little more aggressive with your investments -- if one investment doesn't do well, there is plenty of time to recover your losses. This means that you don't have to stick with savings bonds. Instead, you can afford to invest in stocks. However, it isn't simple to understand how the stock market works, so before you invest your money in stocks, you need to talk to a reputable financial advisor who is willing to diversify your money. This way, you aren't gambling away all of your savings on a bad investment.
You shouldn't rely solely on your financial advisor to make financial decisions for you. You need to know where your money is going and understand how the decisions that your financial advisor makes are benefiting you. So, when you're discussing your options with your financial advisor, ask why one investment option is recommended over another, and learn as much as you can about your investments.
Compare Investment Fees
Although investment fees may not be something that older investors worry about, investment fees can really impact the growth of your investments when it spans a 30-year period. So, before you enter into an investment, discuss the investment fees with your financial advisor so that you know how they will affect your money in the long run.
The sooner you start saving for your retirement, the better off you'll be. You don't want to wait until you're almost at retirement age to worry about how you're going to afford to maintain your lifestyle once you quit working. Instead, take the time to talk to a financial advisor such as Duff & Associates and begin saving for your retirement as soon as possible.