When looking back on their lives, many retirees think about the ways they handled their retirement planning and think about the ways they could have handled their investments better or been more productive with saving money than they were. Often, people reach retirement age and find they have to struggle to cover shortfalls in their income due to poor planning earlier in their lives. It makes sense, then, to consider the importance of retirement planning as early as possible. The younger you are the mort opportunities you have to provide a solid retirement income for later in life.
The Time It Takes
Naturally, the more time you have to set aside money for savings, investments, or for contributions to a 401(k) account, the more money will be there in the future. The most ideal time to start planning for retirement is when you are in your early to mid-twenties. By this time you may have finished college and established yourself in some employment. Now, it may not be a financially lucrative position; the bad economy has continued to throw up challenges to eager young workers seeking to find a good-paying job.
Even if you can barely scrape by, there may be chances to scrimp on expenses and start saving money out of each paycheck. It may not be much to start but the sooner you begin saving money–and getting into that habit–the better your chances of having enough cash later to diversify your retirement savings options. Robust retirement planning starts with savings. Give yourself the time.
Employer Retirement Funding
The prime example of this today is the 401(k) account, which has stepped in to replace the pension system for many businesses. Unlike basic savings, these accounts allow you to accrue interest. Additionally, the employer pays a matching contribution. You can accelerate your retirement savings by applying for one of these accounts as soon as you can afford to do so.
An alternative is to open up an IRA account. More specifically, the Roth IRA may be the best alternative to the 401(k) since you can put after-taxes money into the account and draw that money out at a later day completely tax-free.
A strong component of effective retirement planning when you are young and just starting out is to keep your debt to a minimum. This may be easier said than done if you have student loans or credit card debt, but if you take steps to reduce and eliminate this debt, you will be the better for it. You need do whatever it takes to remove financial drains on your income so the money can be put aside for retirement planning.