Retirement Savings Tips for Young Adults Under 40
When a young adult asks us “when should we start our retirement savings?” We always say as soon as possible. It is never too early or too late to start allocating money for your future.
Still, we also acknowledge that young adults experience different financial situations than those closer to retirement. Individuals who enjoy long, fruitful careers will typically possess more income that they can save versus a recent graduate on an entry-level salary.
Today, we’re going to discuss some simple tips that a young adult can apply to their retirement savings strategy.
1: Don’t Save More Than You Reasonably Can
Today’s young adult population includes younger Gen-Xers, Millennials, and older members of the Gen-Z generation. While Gen-Xers are closer to 40 and earn more on average than the other group, Millennials are expected to earn an average of 20% less than people in their parents’ age group.
Putting away any amount of money into a retirement account at a young age will pay dividends later. Start with a low amount around $50 and begin developing the habit of budgeting this small amount in with your other expenses.
2: Ask Your Employer About Retirement Benefits
If you are just entering a new career, you may not know all of the retirement benefits that could be available to you. Ask your employer or their human resources department about the retirement benefits they offer. For example, do they offer a 401(k) with a percentage match? If so, most companies will withhold the amount you want to save from your paycheck and allocate it to that account for you.
Are you a young adult looking for their first full-time job? Be sure to ask your prospective employers about any retirement benefits during your interview process. Ask them if they offer a 401(k) and up to what percentage they will match.
3: Learn the Basics of Investing
Learning how to invest and build a portfolio will provide you with more income options during retirement. The most popular form of investing is in the stock market, and apps like Robin Hood can teach you some of the basics and allow you to start investing without large upfront commitments.
There are also some more passive investing apps available as well. For example, Acorns will round up your purchases to the nearest dollar and invest that difference for you. This not only helps make all of your purchases an even dollar amount, but it also will save your money for you without requiring active participation from the user.
4: Consider How Future Expenses Will Impact Your Savings
Do you plan to take on more living expenses in the near future, such as a mortgage or having a child? These expenses will increase your current budget. Save with the knowledge that you may have to consider increased living costs in the near future.
5: Always Pay Your Bills First
If you are manually contributing to your retirement savings each month, do not take the money out of your account until you have paid your immediate expenses, such as utility bills, rent/mortgage, debt payments, groceries, etc. Once you have taken care of these payments, allocate a portion of your leftover income for retirement savings.
6: Don’t Beat Yourself Up if You Cannot Save Every Month
On average, Millennials spend more money on leisure activities like travel, streaming services, and eating out than other age groups. If you want to skip contributing to your retirement savings for one month so you can go on vacation, or if you have an unexpected emergency payment, do not give yourself a hard time over this. Just make sure that you continue saving in the following months and do not fall out of your routine!
Looking for More Retirement Savings Strategies? Contact Us
As Southern Idaho’s leading financial services organization, we work with clients of all age groups to help develop actionable retirement savings plans. If you would like to learn more about creating a more secure future for yourself and your family, contact us anytime to speak with a member of our team or complete our free online financial audit.
Related Posts
Estate Planning 101: What You Need to Know
For those who are considering retirement or have already retired, you may be wondering about estate planning. Specifically, what is it, what does it entail, and what do you have to do to prepare for it? We’ll address these questions and provide some valuable insight to help you ready your assets for your end-of-life phase. […]
Should You Hire an Investment Manager? 5 Signs It’s Time
Managing investments can become a stressful process, especially as your portfolio grows. If you have been considering hiring a fiduciary financial advisor to serve as your investment manager, here are some signs you should take the next step. What to Look for in a Good Investment Manager As you are browsing your options for the […]
How to Start Investing Before Retirement
As many adults ponder their eventual retirement, they often start investing as a way to create a more financially secure future. Some individuals grasp the concept of investing quickly while others are looking for an entry point. Today, we are going to explore some possible entry points for those who want to start investing but […]
Everything You Need to Know About 401k Rollover into an IRA
Steadily investing in your 401(k) is one of the smartest things you can do. In fact, a recent study by Fidelity found that the number of 401(k) and IRA millionaires hit a record high in the third quarter of 2019. While the 401(k) is the primary savings plan for many workers, it’s important to note […]
