October 21, 2015
If you’re in your 20s or 30s, saving for retirement may seem financially out of the question or it may just feel like a long way off. While retirement planning at a detailed level may not be realistic for some millennials, there are several simple things we want you to consider adding to your financial priorities.
A great place to start is enrolling in your company 401(k) or opening an IRA and making regular contributions even if:
Instant gratification vs. long-term security
Having a balanced money management approach is critical so you don’t spend all of your extra monies but don't deprive yourself of some fun. Consider splitting your budget so that you can enjoy the things you like to do but also save some money for later. Making a commitment to saving money is your first step to developing the good habit of saving and the significance is that you will be adding real value to your financial future. Here is an example of saving for retirement.
*These figures take into consideration inflation rate of 3% and a tax rate of 15%.
Your biggest asset is time
As a millennial, you are in possession of 30–40 years of investment time. Contribute to your company 401(k) or an IRA in whatever amount you can and plan to increase your contributions when appropriate to do so: getting a raise, getting a promotion or even increasing your contribution amount in small increments every year.
Did you know most employers offer to match your 401(k) contributions up to a certain dollar amount? That match will add to your account value and increase the potential for those assets in your account to grow at a faster rate. This is a free money opportunity everyone should take advantage of.
Of course you will have a variety of investments to choose from. And if you are not sure how to go about getting into the market, many plans provide target date funds that invest according to your retirement date or they have investment models based on how you feel about your risk level.
Taking the time to now to shape saving habits will no doubt serve you well in the future. If you need help sorting out which investment choices are best for you, contact us with your questions.
Email us if you need guidance.
This article was featured in our Millennials Special Edition of 4SIGHT. Sign up free to receive 4SIGHT, our monthly newsletter of helpful financial articles, tips, events, and monthly IRS deadlines.
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