5 Tips for Saving for Retirement

5 Tips for Saving for Retirement

As 20somethings, retirement seems like it’s forever away. Often it isn’t even on our radar much less a part of our budgeting process. However, we have time on our side and starting to save now will prove beneficial later on down the line. Here are some tips to help you start and consistently save for retirement:

  1. If your employer offers 401(k), take advantage of the match and, if you are able to, contribute the maximum amount that your employer will match. 401(k)s are pre-tax (meaning the money will be taxed later when you withdraw the funds) and will lower your current taxable income and therefore the amount of taxes that you owe.

  2. If your employer doesn’t offer 401(k), or if you have additional money to put towards retirement savings beyond what your employer will match, consider Roth (either Roth IRA or Roth 401(k)) accounts. These contributions are made after tax meaning that you pay taxes on them now at your current tax rate, and withdraw the funds tax free at retirement when you will likely be in a higher tax bracket.

  3. Roll your 401(k) into a Roth IRA or into your new employer’s 401(k) when you have a change in employment. It’ll be very tempting, but try not to cash it out.

  4. If you happen to be managing your own funds, diversify the investments within your retirement account. There are mutual funds, individual stocks, bonds, CDs, etc. Do your research, look for investments with low fees, and don’t put all of your eggs into one basket. That way if one of your investments fails completely or doesn’t do as well as you’d hoped, you won’t lose all of your retirement savings.

  5. If you haven’t already, start now! As stated earlier, you have time so let it work for you. The contributions that you make now will compound and earn interest for a longer period of time, so start saving as early as possible. Even if you can only save a small amount each month, do it! “Save a little. Save often.”

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