Why You Need To Be Prepared For Your Retirement in Your 20’s
Why You Need To Be Prepared For Your Retirement in Your 20’s
If you’re in your twenties and have just landed your first job, you’re no doubt excited about what your future holds but in no rush to think about retirement. But, your future starts today and believe it or not you are at the perfect age to start a retirement plan. You may roll your eyes and think ‘retirement’ is for old folks, but the truth is, the earlier you prepare for your retirement, the earlier you can stop having to work, and the more time you’ll have to enjoy the rest of your life.
There are many things you can do to prepare for your retirement, and there are plenty of professionals you can consult for retirement planning, alternative investment management, stocks and bonds, and long-term time deposits. If you want to be rich when you retire, you’d better start now.
Age is an edge.
Being young means you can invest a small amount for a short period and still end up with more money than someone older, even if he or she saves a larger amount over a long period. You’ll be able to achieve financial independence way ahead of others who will only start preparing for their retirement in their forties. Your age gives you the edge, so make the most out of it.
Here’s an example. You manage to land yourself a stable job when you turn 21. You then start putting in $4,000 every year into a retirement account. Compute that with 8% average annual returns, and 40 years later the $160,000 you have put in will have grown into more than $1 million. If you wait until you’re 31, you’ll have to work harder: to reach the same amount and have an early retirement, you’ll have to put in around $8,800 annually. The key is to start small, but start early.
A lesson in money management.
Saving for your retirement helps you manage your finances wisely. Of course, being able to put money into your retirement funds and health insurance means you might have to curb your spending habits and start making smart financial decisions.
Many young adults would splurge on new cars, clothing, and dining out, but if you really want to reap the rewards of working, live cheaply. Pack your own lunch, stick to clothing basics, and take public transportation.
If you really need a car, there are plenty of reliable pre-owned options in the used-car market that will surely meet your needs. If financial independence is your goal, going for a four-dollar cup of coffee every day isn’t going to help. Make sure you pay your credit card bills on time too.
More time, more chances.
Being in your twenties means you can take plenty of chances at the stock market. Stock mutual funds have a huge growth potential, and if you put in at least 80% of your retirement funds into them, your investment can grow a lot more than it would have if you just let it stay in a savings account. You can also explore corporate retirement benefits—take advantage of a 401(k) plan if your company offers it.
You’re never too young to think about retirement. As you can see, the earlier you start preparing for your retirement, the easier it will be, and the faster you’ll be able to achieve financial independence. So start small today and reap big rewards tomorrow!
