Now more than ever, taking care of your money is more important than ever. Here, we talk through how you can start saving for retirement now.
Saving for retirement is a way to guarantee that you will be comfortable in your golden years.
It can be hard to think about saving money for a period of time that seems so far away.
However, there are many reasons to start saving for retirement in your 20s.
Why People Resist Saving for Retirement
When we are young, it can be hard to think about the future, especially when we are making low wages while trying to live our best lives.
Saving for retirement can seem like taking away money that could make us happy right now.
Plus, there’s no guarantee that we will live long enough to enjoy the money that we could have spent in our prime.
How Much Do You Need to Retire?
There is no perfect number when it comes to the amount you need to retire comfortably.
Obviously, more is better because the more you save, the more comfortably you can live. However, there are so many factors when it comes to retirement.
Many jobs have a retirement plan, plus there is an inheritance to consider.
There are calculators that can help you figure out how much you need based on various factors.
You can search on Google to find one for your country, but this one is great if you are based in the USA.
Whatever the goal number is, it is always a great idea to start as early as possible.
Higher Potential Returns
It is true with every investment that the longer you do it, the higher your potential returns.
This isn’t just because saving $100 a month for 30 years equals more money than saving $100 for 15 years, although this is true as well.
Most retirement funds have an interest rate, so the longer you have your money in one, the more you will get at the end of it.
Compound Interest
The New York Times wrote an article on retirement, and it showed some unbelievable maths.
If two people save the same amount every year and retire at 67, the one who starts at 22 will save two as much as the one who starts at 32.
If the amount is $5,000 per year, the difference of 10 years will be a whopping $500,000.
Building a Saving Habit
Saving money, just like anything else, is a habit. It is hard to start a new habit, but once you do, it gets easier.
This is another reason why it is good to start saving as early as possible.
Start small and increase the amount when you can. Remember that the interest will make any amount grow exponentially over time.
Reduce Your Income Taxes
Depending on where you live, you may also be able to reduce your income taxes by saving for your retirement.
If you can have money withheld from your pay check to be placed directly into a specific type of retirement fund, the amounts will not be taxed.
You can do some research to see if you have access to an account like this through an employer or if you can set one up yourself.
This can be different depending on where in the world you live and work.
The reason you should start saving for retirement in your 20s is in the maths.
When you put even a small amount of money away every month, the longer you do it, the more you collect.
Plus, compound interest in retirement funds guarantees that the amount will grow exponentially.
This can make a significant difference to the final savings in just a few years.
From saving to taxes: Taking care of your money has never been so important.
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