If you’re a millennial just starting out in the working world, saving for retirement is probably one of the furthest things from your mind. After all, as a 20 or 30-something, your retirement date is still light years away, or so it seems. The truth is, there are many reasons to start thinking about funding your retirement now, while you still have plenty of time to save. Check out these tips to make saving for retirement a little easier:
Prioritize your savings goals
Millennials have a reputation for living in the moment and overspending on seemingly frivolous purchases (lattes and avocado toast, anyone?) But the reality for many millennials is that immediate goals such as paying down student loan debt often take priority over long-term goals like saving for retirement. Nevertheless, it’s important to find the right balance between paying down debt and saving for retirement. Don’t worry if you have to start small; contributing just $10 a week to your retirement can make a dramatic difference over time through the power of compound interest.
Take advantage of employer-sponsored plans or IRAs
If your job has an employer-sponsored 401(k), be sure to capitalize on this opportunity to grow your retirement savings. Because the contributions you make to a 401(k) are deducted from your taxable income, it may also help reduce your tax liability for the year. Many employers also offer a 401(k) matching program, often 50 percent of what you contribute up to a specific percentage of your salary. If you don’t contribute enough to receive the match, you’re essentially leaving free money on the table.
If your employer doesn’t sponsor a retirement plan, consider opening an Individual Retirement Account (IRA), which allows you to save for retirement in a tax-advantaged way. Wondering how much you should contribute to a 401(k) or IRA? Experts generally recommend devoting between 10 and 15 percent of your gross income to retirement. But even the smallest amount will help build that nest egg as you are starting out.
Stick to your plan but don’t be afraid to shake it up
When it comes to saving for retirement, there’s no one-size-fits-all strategy. Keep contributing to your retirement accounts, but don’t hesitate to refine and adjust your savings strategy as things change. For example, if you receive a raise at work, consider upping your 401(k) contributions. Remember, the sooner you start saving for retirement, the more time your money will have to grow! Start planning, saving and investing today and you’ll be on track for a happy, comfortable retirement.
If you have questions about saving and planning for retirement, don’t be afraid to ask a professional. Let the CFS* financial advisors and registered representatives on our Retirement Solutions Team, available through CFS*, help you develop a plan that will help put you on your path to success. Wright-Patt Credit Union also regularly holds educational seminars, workshops and events on a variety of topics, including the basics of saving for retirement.