When you’re in your 20s or early 30s, it can be hard to see an urgent need to save for that far-away retirement milestone. During this time of your life, there are many other pressing financial needs like getting your career up and running or establishing your family. However, even at this early stage in life, planning for your future starts now. The financial decisions you make today will shape your tomorrow. Financial security in retirement will not happen by accident but will be built through planning and consistent action over the long haul. Here are four tips to get you started now:
Many financial professionals suggest that you contribute a total of 15% of your compensation toward retirement. This goal would include any contributions your employer makes on your behalf. Depending on your specific circumstances, you may need to contribute more.
If you are just beginning your career, that amount may seem too daunting. But you can work toward it by starting with a smaller percentage and increasing it annually or whenever you receive a raise. Saving a percentage of your paycheck instead of a set dollar amount ensures that as your income rises, your contribution will automatically increase and keep pace with your income.
The time value of money is an amazing mathematical principle, so put it to work for you immediately.
Assuming a 6% average annual return, a 25-year-old investing $250 monthly will have approximately $500,000 at age 65. But if he or she waited until age 35 to begin investing $250 per month, he or she would only have approximately $250,000 at age 65.
Right now, time is on your side. The younger you start, the more the compounding effect of money over time works for your benefit.
Many employers offer a retirement plan for their employees. Asking your employer to redirect a percentage of your pay to your retirement plan is a great way to ensure you’re saving consistently.
As an added benefit, many employers will match your contributions to a certain percentage. Don’t leave money on the table! Ensure that you are contributing enough to be eligible for their matching contribution. Employer contributions are a simple way to get you closer to saving 15% of your annual salary for retirement.
You don’t have to be a genius to make wise investment decisions. However, everyone needs a basic knowledge of financial matters. Fortunately, there are abundant resources available. Plan to attend financial seminars hosted by your employer or your church. Go online and find reputable sources of information on investing or financial planning. Learn about the difference between stocks and bonds, how mutual funds work, and an appropriate asset allocation for a young investor.
Ultimately, building a secure retirement for yourself starts with you. But GuideStone® can help you start well on your journey to a secure retirement and stay with you every step of the way. We have many resources available for you, including articles, videos, calculators and webinars.
For more information, contact us at Info@GuideStone.org or 1-888-98-GUIDE (1-888-984-8433), Monday through Friday, from 7 a.m. to 6 p.m. CT.
This material is for educational purposes only. We encourage you to consult with appropriate advisors regarding your unique financial needs and goals.
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