One of the biggest mistakes you can make when it comes to retirement is waiting too long to come up with a plan. Many people don’t start thinking about retirement until it’s quickly approaching, and it can be difficult to reach savings goals with short-term investing strategies.
For many young professionals in their 20’s, possibly having no mortgage or family to take care of means that they may have more room in their budgets for saving. If you are a young person just getting started in your career, now is the time to start planning and saving for retirement. Investing your money in your 20’s rather than your 30’s and even 40’s gives it much more time to grow with compound interest, which could make a big difference in total retirement savings.
Here are suggestions for simple steps to get started with thinking about retirement if you are a young professional.
- Pay Off Your Debt, ASAP
A top priority should be to pay off any and all debts, including car loans, student loans, and credit card debt.
- Build an Emergency Fund: 3-6 months
It’s also important to have an emergency fund in a guaranteed savings account before you truly begin saving and investing for retirement. Having 3-6 months worth of living expenses saved could be a major life-saver if you end up between jobs for an extended period, incurring large unexpected expenses, etc.
- Take Control Over Your Spending Habits: 10%
Once you’ve paid off your debts and built a sufficient emergency fund, now it’s a good time to take a real look at your budget. Creating a clear personal budget and sticking to it is a skill that many adults simply never learn. Aim to start saving 10-15% of your income for retirement.
- Start Contributing to Your Employer’s 401(k) Plan OR Open a Roth IRA
If your employer offers a 401(k) plan with matching, you should consider contributing up to the amount they are willing to match. If you don’t have access to an employer-sponsored 401(k), you should consider opening your own retirement account, such as a Traditional or Roth IRA account for tax-deferred retirement savings.
- Meet With a Professional
Everyone’s financial situation is different, as are their goals for the future. It wouldn’t hurt to meet with a financial professional early on to get some guidance and lay out a specific roadmap to your reaching your personal financial goals. Contact Absolute Retirement Solutions to book an appointment with one of our retirement strategy professionals in the Kansas City/Overland Park area.