Whether you’re a recent college grad, your career is in full gear, or you have a young family, there’s one crucial step you can take to help ensure a healthy and happy retirement: start saving. Preparing for retirement in your 20s and 30s, 3 ways to help max your savings, and getting into the habit of saving now, can really pay dividends later.
Even saving a little can make a big difference. Why? Because of the power of compounding. Right now, time is truly on your side.
What are the benefits of compounding interest you wonder? Here’s an example of compounding interest over a period of time. Compound interest — which is the interest you earn on your principal sum plus previously accumulated interest — can have a dramatic effect on the value of money over time. Let’s say you start saving now for 10 years, and then you stop. When you retire, you’ll have $91,880 in savings. That’s $30,000 more compared to someone who waited 10 years to start and saved for 20 years. Though you saved money over a shorter period, it had more time to compound. That’s why saving now is key.
There are many different ways to save. And there are simple things you can do to find extra money in your budget. And you don’t have to cut out the things you love.
For example, if you made coffee at home, packed your lunch or dropped some premium channels — you could re-direct some real money into your savings.
Remember, saving for retirement is not selfish, so pay yourself first. (Your future self will thank you.) Here are some simple things you can do to start saving and save even more, as well as other retirement planning tips to consider in your 20s and 30s.
Create good savings habits
To set yourself up for financial success over the long term, you need to get into the habit of saving. Here are some easy tips to help you do that.
Create a budget
Do you know where your money is going? By tracking your spending, you can make adjustments and set aside extra money for your retirement savings.
Pay yourself first
Be sure to keep paying yourself first by putting money off the top into your retirement savings — you won’t even know it’s gone. There are plenty of apps to help you budget. Your bank probably offers online tools too.
Have any “leftover” money at the end of the month, once you’ve paid your bills? Consider putting that into savings — instead of spending it. Also, increase your savings as you get raises at work. If you can, start putting away money for your child’s education. There are different types of college savings plans to consider that may also provide tax advantages.
This gives your money time to grow, or compound. Compounding happens when your investments earn money, and then that additional earned money is reinvested — and earns more money. Take advantage of this growth potential.
3 ways to save even more for retirement
Cheers! You’re already in the habit of saving. Wondering how you can save even more?
Meet with me for a complimentary retirement plan (if you haven’t already)
Does your employer offer a retirement plan, like a 401(k) and do you know how it works? I can even help automate the investment on a monthly basis to make sure you are saving for your future. I’ll provide the financial education we didn’t get in schools, I’ll explain how taxes work and why the IRS endorses the 401(k) and many reasons why you should reconsider it. The risks involved, the lack of stability in it, fees involved, and much more. Along with a better way, even with the matching it’s not worth it, I’ll tell you why when we meet.
Understand your options
If you switch jobs or terminate employment, you have options:
- leave the money in the former employer’s plan which is like leaving your money with an ex.
- roll over assets to the new employer’s plan which is just more of the same.
- cash out and get hit with a bunch of fees
- or schedule time with me and I’ll give you an awesome roll over alternative you never heard of before.
Consider speaking with a financial professional like me and tax advisor when making this decision as there may be tax consequences and/or penalties to certain available options which I can also talk to you about. We always recommend speaking to a tax advisor as well, however.
Understand the value of diversification. You have time to weather market ups and downs. Invest according to your risk tolerance and stick to your investment objectives. I can help put some guarantees in your portfolio and suggest other ideas as well.
Don’t let debt weigh you down
Getting your debt under control is also critical for your financial wellness. That’s because it can prevent you from affording things later on, eats up extra income — and leads to bad credit, which could make it difficult to qualify for a mortgage loan if you want to purchase your first home or upgrade to a bigger home. By the way, some of these investments can allow you to borrow against them at little or no interest while still growing in your retirement fund. I’m happy to explain that as well.
Here’s how you can knock down your debt.
Use credit wisely or not at all
Credit cards are convenient, but it’s important to pay more than the required monthly minimum payment. Otherwise, you could be saddled with double-digit interest. If you have multiple credit card balances, pay off your higher interest cards first. I like to share how interest really works for and against you in the case of credit cards.
Live within your means
Be smart about how much house you buy. Childcare is expensive, so research all your options and make a decision you feel comfortable with. Also, learn all about your health insurance coverage to avoid unexpected bills. Be honest with yourself about wants versus needs — cut out unnecessary expenses.
Pay off student loans
Balance paying off high-interest credit cards with student loan debt. You may be able to pay off your loan faster by making extra loan payments (without penalties). You can also pay more than the monthly minimum or refinance at a lower rate.2
Set up an emergency fund
Life is unpredictable. But you can plan for the unexpected — like a simple flat tire repair or if you break your leg snowboarding and can’t work. Set aside enough money to cover three to six months of your expenses. The investments I share also offer protections for the unexpected.
Review your life insurance needs
Now is also a good time to think about life insurance, especially if you have young children. Caring for their basic needs gets more expensive with each passing year. Add to that the costs of childcare and schooling.
Life insurance can help your family maintain its lifestyle and protect your assets if you were to pass away. It’s a good idea to consult a financial professional, that’s me again, to determine which options are right for you based on your plans for the future.
Contact me, because even though retirement may seem ages away, start saving today, or find a way to save a little more, or find a way to make more and maybe I can help with that last one as well.
You don’t have to figure out all this financial stuff by yourself, talk to me. I can help you establish good money habits now, when you’re young.
I can help you ensure your retirement investments are the right mix and map out a plan to help meet your long-term financial goals. And I can make life insurance recommendations or suggest other investment vehicles that may be right for you.
Look for my calendar link in the comments section below and I hope you take action for your future today because tomorrow is promised to nobody.
Hope you got a ton of value out of this one today, please feel free to comment below or send me a message from the healthwealthandrealestate.com website on the “Get in Touch” link at the top of the page and please like and subscribe to the channel so that you don’t miss any future vids. I hope this made you change your view of retirement and saving so that you can start for yourself and if you have a family today.