Financial security in retirement doesn’t just happen because you’ve worked hard all your life. It’s something you need to plan for and work towards. Many young people think that because they’re just starting out in their professions, not making a lot of money, and maybe even struggling to pay their bills that they can’t save for retirement.
The truth is that retirement planning in New Jersey doesn’t have to disrupt your quality of life. By putting away a small amount of money today, you can build up your savings, establish financial security, and look forward to a comfortable future.
Tips for Starting a Retirement Fund in Your 20s and 30s
Now is the perfect time to dream and save. The earlier you begin saving for retirement, the easier it is for your investments to grow. Below are some tips that may help.
Start Small, But Stick to Your Goals
Saving money is a rewarding habit, so it’s important to make it a priority. Start small and try to increase the amount you save over time. The sooner you start, the longer you’ll have to grow your money. Ask our financial advisors in New Jersey about your options for no-minimum, no-fee retirement accounts.
Know Your Retirement Needs
Experts estimate that Americans need 70 to 90 percent of their pre-retirement income to maintain their current standard of living. If you’re not sure how much money you’ll need to retire, you can use a retirement calculator or work with your financial advisor to get a better idea. As you get closer to retirement, these numbers will be more accurate.
Build an Emergency Fund
Another important thing to do is create an emergency fund so that you don’t have to rely on credit cards or your retirement savings if something goes wrong. Ideally, you’ll want to have six months' salary saved in an emergency fund, but anything is better than nothing. Setting up automatic deposits is the best way to ensure your money goes to the right places.
Contribute to Your Employer’s 401(k) Plan
Many employers offer some type of retirement savings plan such as a 401(k) plan. Deductions are automatically withdrawn from your pay, so sign up for this plan and contribute what you can. You’ll be getting paid every month while putting money toward your retirement. Even though your paycheck will be smaller, your taxes will be lower, and most companies offer some type of percentage match to your contribution, helping your 401(k) increase more.
Learn about Your Employer’s Pension Plan
Your employer may offer a standard pension plan as well. Ask for an individual benefit statement and speak with a financial advisor about whether this plan is right for you. There are pros and cons to using a pension plan to save for retirement.
Put Money into an IRA
If your employer doesn’t offer a 401(k) plan, consider opening up an individual retirement account (IRA). You can put up to $6,000 a year into an IRA and even more if you’re 50 or older. IRAs also provide tax benefits, allowing you to keep more of your money. There are two options for IRAs: a traditional IRA and a Roth IRA. Talk to your retirement planner about which one is right for you.
You don’t need to have a high-earning career to retire rich. All you need is to start saving money at a young age. This gives you plenty of time to get used to automatic deposits, increase your savings, and make more progressive investments.