Here’s why you need to start planning your retirement, even in your 20s
There are few young people who consider the importance of investing for retirement and focusing on their future. It is important for people in their 20s to think about this even as they try to grow in their careers and in other personal aspects.
For many, retirement is the one time in their lives whereby they can enjoy their lives without really worrying about money, when they can choice whether to work, or not, and to travel to places where they have always wanted to go..
The first thing that should be considered when it comes down to your savings according to retirement expert Ed Slott is saving for your retirement. He urged the importance of starting early as well as not trying to use money from the savings you have made.
A lot of 20 year olds are thinking about their careers, moving out of their parents home, building relationships, or even starting a family for those who are married. However, they are not ignorant. Millennials want their financial security just like everyone else.
It’s definitely easier to save early for retirement as you would be saving little by little, compared to starting later in life, when you'll have to save in bigger chunks. For those who don’t have children, or haven’t yet considered buying a house then you are at a slight advantage.
The Earlier The Better
When you get to the age whereby you’re ready to retire, you don’t want to live or lead the life you have been living since you were 20. Your life shouldn’t be a struggle, so why not plan early and work towards what you want and avoid what you don’t want. A lot of it may include sacrifices, of not buying that expensive bag or taking that expensive trip. This also means becoming disciplined when it comes to your finances and asking for advice whenever necessary.
Start saving early and as often as possible. Every time you receive your money at the end of the month consider taking a small percentage from this and putting it away. By starting with a small percentage the older you become the more you make changes to that percentage and have more. For instance you could be putting away 5% in your early twenties and increase it to 10% in you mid twenties and so on and so forth. If you find yourself in a job that may not have a big increments in your salary, then you should consider starting with a larger percentage.
Having a financial plan is great as it can also help you find ways in which you can diversify your income. This can lead to making important investment decisions that lead to earning interest and enjoying your desired future.
If you’re still in doubt, it is important to also consider what it is that you want in retirement and how you’ll pay for it.
It’s important to start working on your portfolio while you are in your twenties, by making different investments for long-term returns.
While many millennials are unwilling to put their money in stocks, it is a good asset class for wealth creation. If you focus on stocks at this stage of your life then you are able to take bigger risks. From there, you could start to include foreign stocks, emerging bonds, real estate and other investments that can provide passive income.
The president of Jalinski Advisory Group, Josh Jalinski, believes that by waiting till one is older in order to get serious about retirement they end up losing many years of compound interest potential. "With compound interest, their dollars will double over time, meaning the earlier you begin saving, the more 'free' money you will earn," said Jalinski.
Take Advantage Of Technology
Jalinski added that his company used software that would show young people how their lives would turn out if they were to experience a market crash. It also prepares them for retirement by showing them what it would like if they made certain strategies.
There are a variety of apps that help young people in order to focus on what it is that they want exactly. This can range from party money, rent money among other payments. These apps monitor your expenditure and help identify how you can budget. By having this budget you’re able to see how much you want out of your income to go into your retirement savings. These apps work to your advantage as they help you with managing your finances as well as giving you advice. Most of them don’t require payments when signing up and they show how you how and where to invest.
Learning more about the variety of ways to save money will assist more young people in their twenties to enjoy the lifestyle they expect once they’re ready to retire. Therefore it is important to start early and continue to expand on it in subsequent years.