10 Jun Retirement Prep for Your 20s
It’s never too late to start thinking about your retirement. When you’re in your 20s, it can be easy to get wrapped up in the youth of the moment and neglect the future, at least to some degree. Indeed, many of the things that we do in our 20s build more debt with the understanding that it will improve our financial situation later, such as going to college or buying a house. However, if you take some simple steps to build your retirement now, it is going to pay dividends in later life (literally).
Save Part of Every Paycheck
First of all, it’s a bit cliche at this point, but finding ways to save some money is crucial to setting up future financial success. In your 20s, if you can find a way to save just a little bit of every paycheck, it’s going to create a good habit that will be easier to maintain later in life. Even if it’s just $20 from your latest paycheck, it’s still saving something, and you can start to ramp up your savings later on.
Use an IRA
Unless you have pretty decent retirement benefits with your job, you want to get a retirement fund going as soon as possible. For this reason, setting up an IRA in your 20s is a good idea, since you can get tax deferral on funds that you save into an IRA for retirement, so long as you put $5,500 in the IRA.
Start Investing, Early
Once you start saving your money, it’s important to make sure that your money is working for you, rather than just sitting in a savings account to be eaten away by inflation. For this reason, you need to start investing, early. There’s a misconception that you need a large sum of money to start investing, but that’s certainly not true, nowadays.
Today, apps like Betterment and Wealthfront enable anyone with a smartphone to invest any amount into carefully diversified portfolios. After you have an initial savings fund built up, putting the rest of your savings into a series of simple investments will enable your money to make you even more money, which compounds over the decades to enable you to retire.