Retirement Savings: When to Start

It’s never too early to start saving for retirement. You may have just graduated college and secured your first big kid job. The time is right for you to begin planning for retirement. The earlier you begin a retirement savings, the more your money will earn and it will be something that you won’t have to add to your budget as your grow older.

Where to Save

Tax favored retirement accounts such as an Individual Retirement Account (IRA) or a 401K are the best place to save your money for retirement. Different accounts have different features, with the best being tax deferral. Tax deferral means you don’t have to pay the taxes until you start withdrawing from the account years later. This means that your money is earning more over the time you have it in the account. Many employers will also match their employee’s contributions to retirement accounts, so that is something you don’t want to pass up.

How to Invest

Even though it’s hard to think of retirement when you are just starting out in your 20s you need to plan for about 30 years’ worth of money to live on. With that being said, you are going to want to take advantage of the growth that the stock market provides. The stock market can offer a huge return on your money, but of course is dependent on the economy it’s twists and turns. As easy as it is to earn money, it’s just as easy to lose it as well. If you don’t think you can handle the ups and downs of the stock market for your retirement savings, you may want to put part of it into the stock market and the other part in bonds.

How Much to Save

A rule of thumb is to save 70% of your pre-retirement salary. A lot of this depends on how you plan to live during retirement. If your mortgage is paid off and you live by the same means as when you were working this is a good estimate. It’s a good idea to think about your expenses when you retire and adjust your savings accordingly.

Although retirement seems far away right now, it’s never too soon to begin the habit of saving. If you don’t want to work into your silver years, you’ll want a nice retirement fund. Carolina Money Minders is here to help plan your retirement, contact us today!