How to Save For Retirement in Your 20s

"How do I save for retirement?" is an age-old question that can be hard to answer, especially with the unpredictable economic changes. Just as you "dress for the job you want," you should plan for the retirement you want. Here are some easy things you can do to kickstart your retirement initiative in your early 20s.

Start Saving NOW!

A great rule of thumb is to save money often and as early as possible. This means setting money aside in a savings account, a 401 (k), a Roth IRA, or any other retirement account as early and often as possible. You never want to be in a position where you must catch up with your retirement savings. It's always better to stay ahead of the game to reap the future benefits.

• Create a Budget Know where your money is going. Keep track of all your expenditures and income sources. Adjust when needed and start setting extra money aside in your retirement savings.

Use Your Company Benefits

An employer-sponsored 401K is a great way to automate your savings. Companies may also offer to match your contributions up to a certain percentage or total contrubiton. If you have not signed up, do this as soon as possible. The process is not as complicated as most consumers anticipate. Also, don’t be afraid to ask your Human Resources personnel for clarification about some information that may be confusing. They should be able to walk you through the entire process.

Gradually increase your 401K contributions over time, ideally when you receive a raise. Increase your contribution by 1-3 percent each time. Continue to do this until you contribute approximately 12-15 percent of your income to your retirement plan.

Limit Your Debt

Your retirement financial security heavily depends on effective debt management. It is crucial to avoid entering retirement with debt. Life happens, and sometimes your retirement doesn’t go as planned, such as when you have excess debt. Here are some ways you can potentially avoid this issue once you arrive at retirement age:

• Create an Emergency Fund Life is simply unpredictable. Your emergency savings fund alleviates the financial burden of unexpected expenses.

• Use Credit Only When Needed. Spiraling into credit card debt is quite effortless, particularly if you don't have a plan for repayment in mind. Instead, consider credit cards a helpful tool when no other options remain. However, always remember that whenever you use your credit card, it's vital to pay more than the minimum balance or, even better, pay off the entire balance.

• Live Within Your Means Try to cut out unnecessary expenses and only spend money on things you truly need. However, this doesn't mean you can't reward yourself; we recommend being cautious with your spending. If you must dip into your savings account to make a purchase, carefully consider if it's something that will provide long-term benefit.

Starting your retirement investment is easy with this simple approach. Find a local advisor to get started on a more in-depth plan tailored to you.