Planning your retirement is probably the last thing on your mind as a young adult. Your financial priorities may include simply paying off student loans, making rent, and buying groceries, not contributing your income to retirement investments. However, investing in your retirement early gives you long-term benefits.
Some benefits to contributing to your retirement in your 20s include:
- increasing compound interest
- reducing your taxable income
Below are some tips on planning for retirement now.
Take Advantage of Your Employer’s Retirement Plan
If your employer offers a plan, make sure to enroll! These plans may include a 401k or 403b. Select the amount you prefer taken from each paycheck to be contributed to your plan. If your company agrees to match your contributions, these plans can be especially beneficial. After all, this is an effortless way to plan financially.
Break down your expenses into categories and prioritize your retirement contribution. Tracking your spending habits by writing down your purchases, typing them into a document, or taking advantage of a budgeting app can help you reduce unnecessary spending.
Reduce or Eliminate Debt
Setting up a payment plan for student loans and credit card debt is a vital step in planning for your future. However, do not wait to begin those retirement contributions. Create a financial plan that allows you to simultaneously make monthly payments toward reducing your debt and to your retirement savings.
- Start by paying off loans that carry the highest interest rate.
- Set up automatic payments or a reminder to pay each month.
Take these tips into consideration and start creating a plan that works best for you. Starting a retirement plan, budgeting efficiently, and eliminating debt will help you kick-start saving for your future. The most important step to take is beginning to contribute to your plan now, even if you can only put a small amount of your money aside for retirement.
Need some ideas on how to start budgeting?