New College Grads: Prepare for Retirement Today
Navigating through your college years is exciting and challenging.
While you’re dreaming about and preparing for your future career, one thing that you might not even be thinking about is what happens after you retire.
It might seem strange to think about retirement before you’ve even started your professional life, but it’s important to do so.
With extra expenses piling up, such as car and house payments, it’s hard to take extra cash out of your paycheck for investment purposes, but your early 20s is the best time to start funding that 401(k), as compound interest is on your side the earlier you start.
When budgeting for your future, it is important to learn how to live frugally to help prepare yourself and your potential family to have less stress in the future. Retirement is meant to be a time to enjoy yourself after long years of hard and deserving work.
Here are some tips to start preparing for your next steps:
- Make a budget – Start your future career by making and sticking to a budget. Try to save five to 10 percent of every paycheck.
- Get started by using tax-advantaged savings plans, including 401(k)s and IRAs – With company pension plans and Social Security disappearing from the savings equation, it is important to save for your own retirement through these investments. It is recommended, especially if you want to live comfortably, to have saved 70 percent of your annual pre-retirement income before you retire.
- Stay on top of credit card debt – Credit cards can be helpful, especially when you are on a tight budget, but avoid them if possible and try to pay off your balance in full every month to avoid high interest rates.
- Establish an emergency fund – You can plan ahead as much as you want for retirement, but it’s also important to be prepared for unexpected surprises that can happen on the road to it. That is why it is important to create an emergency fund so you can pay cash for unexpected car repairs or any other unanticipated expenses thrown in your path.
- Start saving just to save – Think about your future long-term. Despite having to pay immediate bills and school expenses, it is important to start thinking about where your money will be in the future. It is hard trying to balance out what you want versus what you need due to short-term gratification. But, in the long term, it is important to weigh out how your financial decisions will help you in the future.
If you liked this article, here are some other posts about saving money:
- Are Money Worries Affecting Your Health? 5 Steps to Take Control This Year
- Three Reasons to Start Budgeting
- Young, Fabulous, and Broke: A Beginner’s Guide to Beating Budget Stress
Photo credit: RobertoDavid