I still remember sitting through orientation at my very first job with real benefits and getting a lecture on saving for retirement. I was eighteen at the time, and still in high school, so I did not pay much attention to what the human resources representative was telling me. However, once I graduated from college and landed my first real job out of college I did pay attention when the human resources representative started talking about retirement benefits, and I took advantage of the programs offered me.
There is a reason that you sit through a benefits lecture at every job orientation that you attend, and that they emphasize saving for retirement consistently starting now. It is important to take your retirement seriously. You cannot rely on the social programs being in place when you retire. Although there may be social security when it comes time for you to retire, the benefits may be reduced or it may be administered in a different fashion. You need to begin saving for retirement as soon as you can.
The advantage of starting in your twenties is that you have a significant amount of time for your savings to grow before you need them. You will have close to forty years to save for retirement, which means you can contribute less each month, but that it will add up over time, and you can still retire comfortably. If have been working for a few years and you have not started contributing to retirement you need to start now. Contact your human resource representative to learn what you need to do to start participating in your 401(k).
Another reason you may not have begun to contribute is because you are still in college or you are still looking for a job. If you are attending school for a secondary degree such as a master’s degree or PhD, you may be in school for a longer period of time, which means less time to save for retirement. You need to begin saving as soon as you land your first job.
The easiest formula to follow is to work up to contributing fifteen percent of your income to retirement each year. This will allow you to save enough to retire comfortably. If you are currently in a debt, you may want to reduce your retirement savings so you can clean up your debt more quickly. However, you should contribute up to your employer’s match, because this is free money you can get for retirement. But as soon as you have paid off the debt, you should up your retirement contributions to fifteen percent.
Once you contribute the money to retirement, you should forget that you have the money. You should not look at it as an emergency fund or as a place to borrow money for the down payment on your home. Leave the money in the account until you retire. Additionally you should choose a more aggressive plan with a higher ate of return when you are younger. If the market goes down, you should not panic, because you will have time to let your investments recover. As you get closer to retirement age, you will need to transition into lower risk investments.
Retirement is your responsibility. The sooner you begin saving, the easier it will be to accrue enough money so that you can retire comfortably. Make it a priority and keep up with your retirement accounts if you change jobs. You can roll your 401(k) into an IRA when you change jobs, so that you have more control over the types of mutual funds it is invested in. if you do not understand what you are doing, then you should hire a financial planner to help you make the decisions. If you have a pension plan, you may need to change your retirement strategy to compensate for the limits on the pension plan.
