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If retirement planning is in your future, there’s no time like the present.
Retirement may seem like a distant dream when you’re in your 20s, but starting early can give you a significant advantage in shaping a strong financial future. From creating a budget to automating your savings, we’ve compiled eight essential tips to help you build a firm foundation for your chill phase.
Key Tips for Retirement Planning in Your 20s:
As someone in their 20s, by simply thinking about your first steps toward retirement planning, you’re already on point! This is because the earlier you begin saving and investing, the more time your money has to grow through earning interest. Even small amounts add up over time, so aim to set aside a portion of your income each month.
If your 9-5 offers a retirement plan, such as a 401(k), make sure to participate. Many employers even match contributions up to a certain percentage, so don’t miss out on that free cheddar! Strive to contribute enough to receive the full match, and consider bumping up your contributions as your salary increases.
Consider opening either a traditional or Roth IRA. Each has unique benefits in terms of tax and withdrawal implications, so choose one that aligns with your financial vibes.
If you’re undecided about whether you should spend a certain portion of your savings or invest in an IRA, take a moment to try out our clutch calculator. By putting away a little today, you’ll likely be pleasantly surprised at how big of an impact it will have on your retirement years.
Creating a budget helps you stay in sync with your spending habits and identify areas where you can save. By tracking your income and expenses, you can put more toward your retirement savings. And while it may be tempting to upgrade your lifestyle as your income increases, stay strong! Instead, consider maintaining a slightly more chill lifestyle now, so you can live it up more in the future.
It’s important to establish what you want your retirement to look like early on. Setting specific goals can not only motivate you to save, but help guide your investment roadmap. Consider deets such as where you want to live, your desired lifestyle and any major expenses that might come up.
Setting up automated transfers from your checking account to your savings or retirement accounts can make retirement planning no sweat! By avoiding the old-school manual approach, you’ll be less likely to skip contributions, and potentially less tempted to spend the money once it’s locked in for later.
High-interest debt is your nemesis when it comes to saving for retirement. Prioritize paying it off, especially if it’s tied to credit cards, and try to avoid taking on new debt. The less you owe, the more you can stash for retirement savings.
As the years go on, life has a way of changing – and so do your money matters! That’s why it’s crucial to meet with a knowledgeable advisor who can help navigate your retirement era. Aim to connect with them at least once a year to stay on track with your goals. They can also help diversify your investments portfolio to manage risk, as well as adjust your contributions, investments and strategies as needed based on evolving life circumstances and market conditions.
Retirement planning in your 20s may seem a bit early, but the choices you make now can have a lasting impact on your financial future. By starting now, educating yourself and making informed decisions, you can set yourself up for a lit retirement.
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Interested in early retirement? We can help you examine your financial situation and prepare for potential lifestyle changes so you can plan accordingly!
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