A large source of stress for many individuals is long-term financial planning. It’s common to wonder if you’re making smart money choices now, like having a retirement savings plan, buying a house or investing in the right place.
While a retirement savings plan can be a big source of anxiety, many young adults don’t know where to start to ensure a comfortable future. In this article, we’ll explore the benefits of retirement planning starting in your 20s or 30s, and offer the first steps you should take to secure your financial well-being.
Having a financial plan for retirement
Building a retirement savings plan may sound like something for business gurus or established career people, but smart money decisions aren’t just for those who read books on investments for fun. Financial planning should be a part of everyone’s lifestyle, and information to make prudent decisions is more accessible than you may think.
Having a financial plan for retirement is important for everyone, male or female, married or single, blue collar or white collar. Starting the task of saving for retirement can feel daunting, though. In reality, the steps are simple.
Understand your goal: the aim of a retirement savings plan is to set aside money now so that when you’re done working, you’ll have enough to live off of comfortably. You may have additional personal goals, like saving enough to travel in retirement or supporting your grandchild in paying for college.
Consider your company’s offerings: most companies will have a 401K or Roth IRA plan that you can easily funnel some of your earnings towards with each paycheck. Your employer may even match what you contribute, meaning if you invest 5 percent of your salary, your company will also invest 5 percent, meaning more money for you down the line.
See what services your employer offers: many companies offer assistance to their employees to aid in long-term financial planning. If your company has an employee assistance program, like Mazzitti & Sullivan EAP, you’ll have access to resources and one-on-one guidance from trained professionals.
Assess and reassess: using an online 401K retirement plan calculator, you can determine whether you’re on track to meet your goals with just a few clicks. The calculator can help you estimate a retirement age, or how much money you’ll have when you retire based on what you’re contributing now.
A retirement savings plan can give you the security you want and ease your stress.
Benefits of retirement planning
Getting a head start on a retirement savings plan can offer some huge perks, and the sooner you start, the better.
1. Compounding interest
One of the best ways young adults can prepare for their future is by investing early. One of the perks of investing in a 401K or Roth IRA is the compounding interest that builds up over years. Compounding interest means that your money will be earning money. The earlier you invest, the faster your money builds.
2. Ease of mind
The American Psychological Association’s yearly survey on stress showed that finances are the top reported source of stress for American adults. Through a retirement savings plan, you can give yourself the gift of mental peace. If you start saving now you can avoid panic down the line and give yourself confidence moving forward in your career and life.
3. Freedom to enjoy your money after contributing to a retirement account
One of the best perks about saving for retirement and managing your money well is that you’ll feel at liberty to use the money you have left after you’ve set aside a predetermined amount for savings. You’ll experience the freedom to use your money how you choose without feeling guilty about spending it.
4. Earlier retirement
Financial planning for retirement sets you up for early retirement if you’re diligent about budget habits and anticipate the lifestyle you want to live and reflect that in your savings. The more you are able to balance your lifestyle now, the sooner you’ll be able to enjoy the freedom to choose whether or not to work.
Looking for a quick estimate on how much you’ll need to save to be on track for retirement? Most checkpoints state that you’ll want to have saved around a full year’s salary by the age of 30. For example, if you make 65,000$ a year, you’ll want to set aside $65,000 for retirement by the age of 30.
If you’re looking to find guidance for a retirement savings plan, Mazzitti & Sullivan EAP can help. Through free access to support and professional assistance, you can be assured you’re taking the right steps now to secure your future.