The American people are barreling towards a retirement crisis. Unfortunately, far too many people are not saving for retirement. In fact, financial experts project that 55 percent of Americans are not saving enough money.
If you want to enjoy your retirement, it is time to start saving now. With dedication and the right moves, you could save up over a million dollars by the time you retire. The younger you start saving, the better your odds of becoming a millionaire are.
Read on to learn how to develop a retirement plan for young people. Explore topics like when to start planning for retirement and successful savings strategies.
Start Saving Earlier
A large number of young people shrug off retirement planning. They want to live in the moment and are not thinking about a milestone that is decades away. However, this is a monumental mistake and forgoes hundreds of thousands in compounding growth.
The earlier you start saving, the more time it has to grow. A general rule of thumb is that you should be saving 20 percent of your income for retirement.
Many do not reach this goal, however, any retirement contribution is valuable. If your employer does not have a 401(k) program, open up an Individual Retirement Account (IRA).
Take Advantage of Your Employer Match
Many employers offer a matching contribution to their employees’ retirement savings plans. This means that your employer will contribute $1 for each $1 you save up to a certain percentage.
For example, some employers offer a five percent match on their 401(k) plan. If you earn $5000 per month, this means your employer will contribute up to $250 to your retirement savings.
Stunningly, far too many Americans are turning down this valuable benefit. Studies show that 20 percent of Americans are not taking full advantage.
By turning down this benefit, you are only putting more money in your employer’s pocket. These matching contributions allow for compounding earnings growth and make the value of your plan rise much faster.
Start building emergency savings. Most financial advisors recommend three to six months of living expenses in cash. This is to cover the bare essentials should you lose your job or vehicle breaks down. you can still afford to pay your bills and fix your car.
Credit cards have high-interest rates and often we get caught up with the ability to overuse credit cards. A credit card can be good to build your credit. Ensure whatever you charge to the card, you can pay off in full each month avoiding paying interest.
Let It Ride
Many young people are intimidated by investments in equities and bonds. They fear bear markets and corrections. Some feel it is too complicated and that they do not understand it well enough to dive in.
There are a couple of universal truths in the investment world. While there are sometimes large corrections, the market always roars back. It is a mistake to panic sell and takes a loss.
Instead, you should entrust your retirement portfolio to a trusted financial advisor. Many employers have financial professionals manage their 401(k) investments. They select diversified investments that accept risk based on the age and preferences of the customer.
Retirement Plans for Young People
The key takeaway from this blog post is to start investing early. Do not make the mistake of waiting. Making a commitment to early investing can significantly reduce the number of years that you need to work.
If you enjoyed this article about developing a retirement plan in your twenties or thirties, check out our blog for more great content.