I know, you’re just a twenty-something trying to have fun, but you really need to be thinking about your retirement. More importantly how you plan to not work until you’re 80 because you couldn’t figure out how to save money early in life. And by the time we’re old, we won’t be able to get our social security check until were like 75. So unless you plan on working that long, you should probably start saving for retirement. Just going to throw that out there.
Let me first start by sharing some really eye opening numbers with you that should hopefully scare you into saving for retirement, if you aren’t already. Most people need around 80% of the their pre-retirement income in retirement. So if you’re making $100,000 per year, you’ll need $85,000 per year as a retiree. And if you make $100,000 per year and plan to retire at age 65, you’ll need a little more than $2 million dollars for retirement. Sound like a lot huh? Well it is, but with matching and saving early on, it will be easier to come up with this kind of money. So, say you are 25 years old and have no money saved up so far, but plan to save 10% of your income from here on out. You will still be $1.2 million dollars short. Now what if you or your spouse needs long-term medical care? This can be extremely costly so you need to make sure that you have even more saved up for contingency costs. Ready to start a retirement account now?
How do I save for retirement? Well, most companies can help with that. If you are at a company that matches your contribution, you really should think strongly before turning that down. It’s free money people. And what is better than free money? Nothing. Well maybe free puppies. Most companies offer a retirement plan so I highly suggest researching this and seeing how you can benefit from this program. Now, they only match what you put in up to a certain percentage, and you have to be putting the first half in. They’re not just going to give it to you willy nilly, you have to be contributing also. Hence the word “match”. You can obviously put more in, which I suggest you do especially if the match rate is lower, like 3 percent. Now this is only in the private sector, I’m not sure about government jobs so if that’s you, you should probably look into their program.
Which retirement plan should I choose? There are so many 401K’s and IRA’s to choose from. Some tax before, some tax after. Just remember that if you choose a plan that doesn’t tax the money when it goes in, it is going to tax it when it comes out. Another thing to know: once the money is in there, it should probably stay there. If you take money out of these accounts before the specified retirement age, you are going to be paying a penalty on it. When I put money in my retirement account, its gone. I am not going to use it until I’m old so I better have enough money in other accounts for emergencies. One last thing, I would put this money into a mutual fund and don’t worry about it. Mutual funds have low risk and will most definitely increase tremendously over 40 years, so don’t be concerned if it loses a little bit of money one quarter. This is trivial in the scheme of things.
Look into opening a retirement account, like right now!