When you first come out of college, and even further in your career when you start to have a family, retirement may be the furthest thing from your mind. Think about how long you have been in your current job or how long you have been out of school for. I bet it went by pretty fast. Well retirement may still be decades away, but it is definitely something to think about, hopefully sooner than later, so you have enough to enjoy when you are supposed to be sitting back and relaxing. To ensure that you have enough of a retirement fund built up by the time you are ready to cash out in your golden years, it is best to start securing your future fortune right now.
Have Early Retirement on Your Mind at All Times
The further you get along if your career, and even life for that matter as you start a family, you start to think about providing for your children and still taking care of you/your spouse when you get older, not to mention enjoying life while not working. Starting to curb spending and focusing more on saving will be a new way of life and definitely an adjustment, but if you can think about each large purchase you make, like were the clothes purchase necessary when you could have put that money in an account to grow compound interest over the next few decades.
Keep an Emergency Fund on Hand
You never know what life can throw at you, so it is a good idea to be prepared, without sacrificing your future. Whether it is fixing your car, making some upgrades around the house, or even having a vacation fund to dip into when you are ready to take a summer trip, it is nice to have cash on hand so that you do not have to put on a credit card, or even worse, cashing out your 401(k) that would not only take away from your balance, but risk falling short of your retirement goal.
Reduce Monthly Expenses
Not only reducing spending is important to free up extra money for saving, but reducing overall expenses as well, and that starts with debt. If you are current making payments on a remaining student loan for say, $100 a month, finally paying that off will free that up, as well as credit card being the one of the biggest, which can get you into a hole starting to pay interest on that balance every month. Think about your mortgage as well, if moving from a 30 to 15-year makes sense, as it would increase monthly expenses in the short term, but will be completely paid off in 15 years.
Maximize 401(k) Contributions
If you are able to contribute to an employer based 401(k) accounts at work that is usually the first place to start. Check to see if your company offers matching contributions, so you can at least contribute that max as a good place to start to not only fund your account, but get free money in the meantime. Contributing any less than what your employer matches is leaving free money on the table and could cost you thousands each year, not to mention missing out on that money growing each year.
Open an IRA
Whether you do not have a 401(k) at work, or you are just looking to start another account to save for retirement, an IRA is a good place to go, with a couple choices, being a traditional that is taxed when you withdraw in retirement, and a Roth, where you contribute after tax and you can withdraw tax free, which may make the most sense if you figure that you will probably want to maximize every dollar you can when you are beginning to live on a very fixed income. Always consult a financial planner with advice on what is best for your situation.
Come Up with Extra Income
Sometimes you can make all of the right decisions when it comes to reducing monthly spending and expenses, but it can be difficult to come up with extra money to put towards savings. Coming up with extra income to use solely to fund retirement may be a good idea if you can sacrifice the extra house and energy now while you’re young, whether it be working a side job, doing various paid online work, or even starting to sell items you make, or better yet, that are sitting around your house collecting dust that you can cash in for a little extra money.