Grandma’s house is such a simple place where so many of us have created so many memories. Baking cookies with grandma playing airplane with grandpa, running around in the backyard with our cousins.
Making all of these precious memories all because our grandparents made it possible. Now imagine grandma being too busy to have company because she was 65 and not retiring because she was still working. Is this where we are headed?
All too often we as young adults hear the word retirement and think “we’re so young, we have a long time before we’ll need to worry about that.” Right?
Wrong! This is the perfect time to start making a retirement plan, and sticking to it.
We all envision our retired life to look something like, traveling and exploring,wine tasting and visiting museums, or just enjoying our financial freedom.
However, the fact is just last year statics shared that 74% of americans plan on working past a traditional retirement age. Those are some frightening numbers if you ask me.
What does retirement look like for you?
Are you at a dead end job or do you have a career where you’re growing?
Are you paying into a 401k? A Roth IRA account?
Are you just floating through life telling yourself that social security will take care of you during your retirement?
Or are you part of the 74% who have decided they want to work themselves into a grave?
Although it might be a bit hard to think about what you want your retirement to look like exactly, the reality is it will cost money.
That money is entirely up to YOU to save. To truly ensure your retired life looks the way you want, you would be wise to make saving your money now, a priority.
Why is saving money for retirement so crucial?
When you sit down and think about how much money you will need for your retirement, you may think “Well, hardly any.”
What many people do not consider, is health costs, inflation, taxes, and of course end of life. Now asking the same question, did your answer change? Mine did.
Saving money for retirement must become a priority in our 20’s.
We want to retire to rest and enjoy life, not to struggle more because of it. You wouldn’t want to leave your family in debt due to things that were not planned for.
Sudden death with no saving for funeral costs and now your family is stuck with the bill. This is why we must start saving today.
How can you start saving today?
One of the easiest ways to begin savings for retirement is by signing up for your employer’s 401k plan.
If that is not an option for you, you can look into opening up a ROTH IRA.
What is a ROTH IRA account?
It’s a retirement account allowing a person to set aside after-tax income up to a specific amount annually. After the age of 59 all of your earnings and withdrawals are tax-free.
Another simple way to save for retired life is by building an emergency fund in your 20’s.
Most often were told the ideal emergency fund is a 2-3 month plan. In reality, that emergency fund should look a little more along the lines of an 8-12 month plan.
If something were to ever happen, getting laid-ff, losing a loved one, natural events like a fire, we would definitely need more than 2-3 months of savings to get back on our feet.
Having a bigger emergency fund will not only ensure our finances are covered in the event such as these, but improves our savings skills greatly.
Invest aggressively while you’re young.
After all, when you’re in your 20’s, you have time until your retirement which means you can afford to ride out setbacks. There are two main reasons that now is the time to be a bold investor.
First reason, you won’t need the money anytime soon.
Retirement is so far away, so one year gain or loss doesn’t really matter. Although stocks may bounce around a lot more than cash or bonds, they deliver far better results. And at this point of your life, you will care more about maximizing the average return.
Secondly, small differences grow greatly overtime. Using edward jones calculator, we’re able to see that at just age 24, you would need to save $5,500 annually to reach a million by the age of 55 with 10% investment rate of return. That’s about $459 a month that would go directly into a saving account or a roth ira.
What does it mean to invest aggressively?
Well first off, what exactly does a “conservative” investing strategy look like, and what differentiates it from an “aggressive” one?
A conservative investment portfolio is focused more towards bonds and money market funds, giving you low returns but also very little risk. While, Aggressive portfolios are heavily focused more towards stocks, and are far better for those who can handle a few setbacks in exchange for an overall higher return.
Although, as you get older and your retirement begins its approach, you’ll want to shift your portfolio to a more conservative investment strategy to minimize your risks.
So how can you get comfortable with investing aggressively for retirement?
Begin to think about replicating Target-date funds.
Setting a target-date fund for your estimated retirement year is a shortcut to age-appropriate investing. However they tend to have higher management fees so investing in more than just one directly is wise.
Remember you are playing the long game.
You aren’t investing for just a few years from now – you’re investing in your retirement for forty years, or more.
Regular contributions are what really matter.
If you’re in your 20’s, don’t play it too safe. Choose a portfolio allocation that puts your money to work.
Find a Financial Advisor
In the midst of saving on your own and planning for your retirement a ways down the road, it may be beneficial to seek out a Financial Advisor.
If you are not quite confident to take the planning into your own hands, plan to meet with an advisor to get a more strategic plan laid out.
Come see us over here at Assured Retirement Group to get started on your retirement plan.
Or Download your FREE Retirement guide from Assured Retirement Group, to get a little bit of guidance. Given that you are starting early for retirement, this guide will undoubtedly help in your planning process.