At the early stage of a new beginning, transitioning from studies to an exciting career, young adults often focus on paying off student loans and other debts. Some might also find themselves spending their money on things they have eyed for a long time.
There is no greater feeling than walking into a store and buying something that you have wanted for such a long time. Come on, it’s your hard-earned money. You should spend it! But if you have the long term in mind and some extra money in your pocket after your monthly expenses, you might want to consider spending it wisely.
Therefore, we are happy to share an insightful article that could guide you on why you might need to consider retirement plans early on, while also sharing valuable tips on how to start saving today. Are you ready to dream big and save bigger? Buckle up your seat belt, because you might drive into the sunset!
Why Retirement Planning Matters for Young Adults
Time is on Your Side
You can start saving any time you want, no matter your age. Any savings is good savings. But most financial advisors would say that the earlier you start saving, the better. Mostly because you can take advantage of compound interest. For those who are not too familiar with this term, let’s break it down in simpler ways.
Compound interest is when you invest money, and the returns you earn are added to your original amount. This bigger amount then earns more returns in the following years.
The longer your money grows, the more powerful this compounding effect becomes. For example, saving $200 a month starting at age 25 can grow to nearly $500,000 by the time you’re 65, assuming a 7% annual return. This is wild!
You’ll Have More Choices Later
Think about it: the earlier you start saving, the more choices you’ll have in the future.
Depending on the amount of money you put in, you’ll be able to start thinking of early retirement or even starting your own business. The possibilities are endless when you have enough savings without the pressure of needing a steady income.
Financial Security
You might work for a company that offers a competitive salary, but rather than putting some money away, you decide to spend it all. That’s the dream, right? Who doesn’t want to buy the things they want when they want?
As amazing as it is, when it comes to the long term, it gets quite risky. If you spend your salary each month and don’t have a retirement plan, what would you have to show when you finally retire?
Besides, we can’t predict the future. Health issues or economic downturns can occur, and it’s best to be prepared for such unexpected events. If you’re able to put money away, we encourage you to go ahead, even if you start with small amounts. It’s worth it!
How to Get Started with Retirement Planning
Educate Yourself
Maybe you are interested in a retirement plan and able to put money away, but you’re not sure where to start. The best advice in almost any scenario is to educate yourself. When your hard-earned money is on the line, it’s best to gather as much information as possible.
Do some thorough research online or contact a financial advisor to assist you in making the best possible choices for your investments.
Set Clear Goals
Setting clear goals is as important as doing thorough research. Ask yourself what kind of retirement lifestyle you want and estimate how much you’ll need to achieve it.
We highly recommend using retirement calculators available online to get a rough idea of your target savings amount based on your age, income, and expected expenses.
Automate Your Savings
After setting up a goal and deciding on an amount that you would prefer to put away, consider setting up automatic contributions to your retirement accounts to ensure you’re consistently saving.
This also makes it easier to stick to your savings goals since the money is invested before you have a chance to spend it.
Review Your Plan Regularly
As your goals and financial situations can change over time, it is essential to review your retirement plan often to ensure it is aligned with your aspirations and to make changes accordingly.
This may involve expanding your contributions as your income increases, readjusting your portfolio, and staying updated about tax law changes and retirement regulations.
Final Thoughts
Often, we see that some are discouraged about putting money away, having the mindset that the future is far away. But here’s the thing: as your money starts growing, you’ll become more confident in the fact that you’re reaching your financial goals.
You’ll be prepared for unexpected events, and you might find yourself in a situation where you have the flexibility to spend your savings on what matters most. So, dream big and save bigger! Your future self will thank you.
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