Here are five things Bill Malloy San Diego investor and entrepreneur wants every young worker to know about retirement.
Start Young
The biggest hurdle young people have when thinking about retirement is realizing that starting young is vital to financial security later in life. While it’s true that those just starting out aren’t earning the kind of salary that easily fits into a savings plan, taking advantage of compounding interest over the years will make even the smallest contribution grow significantly.
Starting too late in life will mean losing out on years of growth. In addition, younger investors can afford to take more financial risks and enjoy the increased rewards that come with it.
Prioritize Retirement Savings
Another useful bit of advice for young people is to prioritize retirement savings. When young adults enter the workforce, they may be doing so with student loans and other debts while also trying to build a life from scratch.
Some may be living on their own for the first time and possibly getting married and having children.
These are all important financial considerations, but saving for retirement still has to be a priority. Many young parents worry about saving for their children’s education to the detriment of their own future financial security.
This can be a mistake since loans are available for college but not for retirement. Furthermore, children benefit more from having financially secure parents who are self-reliant well into their old age than they do from having a four-year education paid off.
Maximize Company Matching
If an employer matches employee contributions in a 401(k) or other retirement plan, young investors should contribute at least the percentage the company matches. Not doing so is like forfeiting free money.
Also, contributions are often taken directly from employees’ paychecks, so it’s money they’ll never even miss. With the added tax benefits that come with such plans, it’s clear that employees should never miss out on the opportunity to invest in company-sponsored retirement savings plans.
Prepare for Disability
Many young workers assume they’ll be working well into their golden years. The unfortunate reality is nearly 1 in 4 Americans will become disabled before they reach retirement, so counting on working forever isn’t a useful strategy.
other related articles of interest:
Retirement Planning – What Options Do You Have?
Retirement Planning: Mistakes People Make and Their Solutions
Staying fit and focusing on good health can help, but life is unpredictable. Putting money away while they’re young is the best way to hedge against the possibility that they’ll need to stop working before they’d like.
Plan for Longevity
While disability is one possibility, outliving savings is another. Young people need to start saving right away because they may live longer than the generations before them. With people living longer, retirement could last 20 years or more for some, so starting to save while young and healthy is vital to carry them through the rest of their lives.
Young people have a tough time imagining what retirement will be like, but it comes up sooner they think. The invincibility of youth will sometimes overshadow the need to plan ahead, but that’s why young workers need to know the importance of saving for retirement from the beginning.
Image Credit: young workers need to know about retirement by envato.com
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