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Written by North Capital

Start Planning for Retirement in Your 20s

Guest post from TheLifeBlogger, an events professional by day and a passionate blogger by night.  She loves writing about financial planning and other tips she has tried and tested to improve lifestyle.  Watch out for her blog soon!

 

The earlier you think about retirement, the sooner you will be able to enjoy a life free of financial stress. While you are in your 20s, you can already begin to plan your retirement and save up for your future. Apparently, it’s not that easy for some people though, especially the Millennials. CNBC revealed that Millennials are ready to think about their retirement early, but they have unrealistic plans for their future. Over 1/3 of all Millennials believe that winning the lottery is a viable investment strategy, or that they will “gifted” money for retirement.  This sort of mindset will make it hard for you to properly plan your future. To help get you on the right track, here are some ideas on how you can jumpstart your retirement fund:

 

Sign up for a retirement plan ASAP
Most employers now offer 401 (K) plans that provide for tax-advantaged investing for your retirement. Through these plans, workers can save and invest a part of their paycheck before taxes are withheld. But, how much should you contribute to your retirement fund? “As much as possible,” says a guide offered by The Wall Street Journal, but3% of your salary is a good start, so you still have money to cover your daily expenses.

 

Educate yourself and learn investment fundamentals
The best way to grow your retirement portfolio is to create a diversified portfolio from among the mutual funds and other investment options available to you.   Checking the reputation of the fund manager, evaluating the investment strategy, and assessing past performance with a keen eye towards fees and expenses are basic steps you should take as a new investor. Investors also should try to develop a basic understanding of economics and government policies of the countries in which they are investing. It’s important to know if a county is in a growth or recessionary phase, as it can affect your investment prospects. A recession affects the a wide range of economic activities from the income and employment of people, to retail sales and industrial production. “A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough,” explains FXCM in their post. Having a basic understanding of economics may help you avoid certain pitfalls that could adversely affect your investment portfolio.

 

Free yourself from debt and save more
Getting yourself out of debt is a critically important step for many Millennials to get on the road to retirement savings. It’s important that you start with a clean financial slate. Never invest or start a retirement plan when you are still paying off high interest rate debts, such as credit card bills. You can save more money if you are free from prior commitments that require cash payments and offer no tax benefits. If you are having difficulty clearing your debts, you may need to reevaluate your spending. Some expenses aren’t necessities and may need to be taken off your list of important bills. Reducing expenses and allocating the cash flow towards outstanding loans can help you to retire your debt and build your retirement savings. It also will help your financial peace of mind.

 

Other helpful tips:

  • Consider using a budgeting tool such as Mint or Quicken;
  • Seek assistance from experts (financial advisor) if needed;
  • Open and contribute to a ROTH IRA if you are eligible;
  • Invest in an HSA (Health Savings Account), if available;
  • Build a strong investment portfolio and contribute to it over time.

 

Whether paying down debt, contributing to a retirement plan, or undertaking another investment strategy, make sure that you plan wisely and seek professional advice if you need it. We all work hard for our monthly salary, and we want to make sure we put it to good use. You can be a smart investor by thinking about retirement early in your working life and starting to plan now.

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