Saving for retirement is one of the most important things that young people can do. Sadly, many of them do not consider retirement savings until they get closer to middle age. Young people should heed the advice of their elders and begin saving for retirement as soon as they get their very first jobs.
Defining a Young Person
A “young person” is anyone in the work world in their twenties. When young people graduate from college and move into their first jobs, one of the first things they should do it meet with a financial planner to discuss saving for retirement. A financial planner worth her salt will be able to give some realistic retirement savings tips. Since many young people are just trying to get by with rent, car payments, and college loans, they do not usually have retirement saving on their minds.
Meeting with a Financial Planner
Young people do not need to save huge amounts of money when they start their retirement planning. The best part about starting young is interest, namely compound interest. The sooner young people begin planning for retirement, the more interest they will make on the money they put away and that money continues to build more interest as the time passes. This is not the same for people who begin saving at middle age, by the time the young people turn 40, they have missed out on nearly 20 years of interest.
Last of the Pension Funds
Over the years, retirement planning has changed. Young people will not have the same retirement benefits at their employers that their parents had. Today’s young people will most likely never hear the word “pension” from their employers. Due to the changes in retirement pensions and benefits, young people should begin investing in funds that will guarantee interest. While most investments do not guarantee any type of growth, there are usually some funds that are safer than others.
Asking About Alternative Ideas
Since the traditional pension is no longer a reliable form of retirement for young people, they can always look into non-traditional retirement savings. As always, it is best to consult with a financial planner before making an decisions, but there is nothing wrong with asking about retirement savings tips for alternative ideas. Again, starting early is better than waiting until it is too late.
Compound Interest Cannot Be Replaced
Instead of waiting until you have money to save, it is best to budget so you can save money. If you consider saving $100 per month, over the course of ten years, you would have $12,000, without factoring in the compound interest you would make over those ten years. With just two percent interest compounded once per year, you would have over $13,000.
The best tip for saving for retirement is to start doing it as young as you can, because you cannot replace compound interest, which is free money.