One common question that people ask is just how much you should be putting towards retirement each paycheck. An easy answer is to put a certain percentage away each month. If this is your method than you simply need to put away a predetermined amount each month. Most experts agree that you should be working towards putting fifteen percent of your gross earnings into retirement each month. However if you aren’t saving anything you can start by contributing up to your employer’s match and then work your way up. Another easy way is to start by putting your raises into your retirement fund.
Another way is to calculate how much you’ll need once you retire. You should take into account how much you plan on traveling and the increased cost of living. Then you need to determine how much you need to save each month to reach that goal. You can talk to a financial planner to determine how to invest this money. When you are in your twenties you should be more focused on contributing as much as you can, the early investment will pay off in the long run.
Additionally you may want to consider the retirement accounts that will allow your earnings to accumulate tax free such as a Roth IRA and a Roth 401(k). Although these contributions are made after you pay your taxes, your earnings will be withdrawn tax free, which will be a substantial savings over time. You may reach a point where you have maxed out your contributions that can go into a traditional retirement savings account. When that happens you should invest your money in mutual funds that earn a good interest rate. This will help to spread your risk. Another excellent investment option is real estate, but you should only do this after you have maxed out your 401(k) and IRA options.
