For many people, a person’s twenties are a time in which they slowly become more of themselves, make mistakes and grow from their past. During this decade of fun and carefree excitement, there can still be pressing concerns that sometimes ruin the party. Financial burdens from student loans, living on your own and dealing with entry-level pay are staple concerns for anyone in their twenties. Therefore, retirement planning is regularly put on the back burner. However, if a millennial or Gen-Zer sets money aside for retirement, they will be able to amplify the power of compound interest. In other terms, more money. Interested in learning more? Read on to better understand the potential of saving early and learn tips on how to become more financially independent and prepared for unknown future.
The Benefits Of Saving Early
There are several benefits to planning out your retirement savings in your roaring twenties. Not only does budgeting for the future help lay the foundation for healthy financial habits, but also allows the person to later reap the generous profit made from compound interest. By establishing these financial priorities early in life, you’ll be able to have more peace of mind when things start getting more complicated later on. Additionally, having a set savings plan throughout the years will help ease worries and make it much easier for some to make the decision to retire earlier than expected.
Saving for retirement early can also have a positive effect on your income taxes—now and in the future. It can potentially lessen your current and future tax burdens based on what kind of IRA you set up along with other influential factors. Consider hiring a qualified tax professional or financial planner to help you take advantage of these financial benefits and inform you on your best route to success. It’s always helpful to have a qualified professional by your side.
Where To Start
The hardest part of the process is always the first step, or in this case, the first dollar. So, you may already be wondering where to begin. How does a young twenty-something build out their nest egg? Especially when there’s bills to pay. Have no fear! There are several resources for millennials and Gen-Zers to utilize to help with retirement planning such as their employers.
Some companies offer individual retirement accounts to their staff members. Moreover, many of these same organizations will also match your contributions up to a specific percentage of your paycheck. Do not stress about the amount of money being put towards these accounts. Young professionals who cannot contribute much can start with a small percentage of their check and increase it each year or whenever they feel financially comfortable. It is recommended by experts that young employees should save a minimum of 10% of their yearly salary toward retirement.
Not only is it wise to save for retirement at an early age, but it’s also recommended that many young professionals set aside an emergency fund around the same time. Emergency funds are extremely helpful for unexpected bills or situations but allows your retirement savings to continue growing without disruption. Additionally, take time out to check out local banks and other financial institutions to compare savings accounts. It’s important to see all your possible options and pick one that best suits your goals and needs.
Your retirement years may feel like forever away, but it’s never too early to start preparing for it. Saving money in your twenties could help counteract possible financial stresses later on. To find out more about why you should start saving for retirement in your twenties along with tips and trick, check out the infographic below.