When should I start saving for retirement? - CCCU
Friday, February 15 CCCU
Should I be saving for retirement?
Knowing when it’s time to start saving for retirement can be tricky. Often, it feels overwhelming to begin, or debt keeps us from getting started. In this piece we’ll help you work out an appropriate timeline for your situation.
Start saving for retirement if:
- You have employer 401(k) matching
- You are able to contribute to a Roth IRA
- You have an emergency fund
- You can comfortably put money away while also paying down debt
While figuring out when and how to start saving for retirement is a crucial part of our lives, often, we are not taught about how to get started. Personal finance and achieving financial independence are important goals of both millennials and Generation Z. Understanding where your money is coming from and how to best use it to ensure your future is crucial for making retirement possible.
When should you start saving for retirement?
As early as possible! Most people can start saving before college even, with a Roth IRA if they have federally taxable income. If that isn’t possible, as soon as you are able to contribute to a 401(k) program, you should. Many companies offer some percentage matching. This is “free” money, which helps you build towards a comfortable financial future.
With the impressive impact of compound interest, saving as little as $3-5k per year can make a huge difference if you begin before you are 30. If you’re starting later, that’s okay too. The most important thing is making a plan and to start saving.
How to start saving with an employer retirement plan
If your employer offers a plan, going to your HR department is the first step to learning more about how you can take advantage. As the money you contribute is pre-tax for most retirement accounts, you will likely not see a big difference in your paycheck, but a huge difference in your savings.
Contribute at least as much as you can to maximize you employer contribution to fully enjoy the benefits of interest and growth throughout the years.
Start with an IRA
Starting an IRA is as simple as finding the right company for you with the right services. If you’re a new investor, something which uses an algorithm or a personal wealth manager will probably be best. Look for a service that charges a low management fee, typically 0.25% or less and offers the services that will keep you from having to micro manage your accounts.
If you prefer to be more hands on and want to choose exactly how your money is invested, a broker firm may be a better choice. Ideally, look for one that doesn’t charge commissions, has account minimums that match with your means, and provides customer support--especially if this is your first time investing.
CCCU offers both traditional and Roth IRAs. Learn more about our offerings here
Guilt and saving
If you have debt, or other financial obligations like parents or children that keep you from being able to save, we understand. There is often guilt associated with not saving. Try not to blame yourself for not being able to save earlier. Even if you can’t contribute the full amount to your 401(k), or you’re still building your emergency fund, you can still save for retirement. Small amounts can have big impacts with compound interest.
Once you’ve started saving for retirement, watching your 401(k) or Roth IRA grow will be a treat! Be sure to keep an eye on your investments, but don’t stress out too much if there are fluctuations. As you get older, be sure to keep up with how your money is being invested. At the beginning of your career, riskier investments may be worth it, but as you get close to retirement that shifts. Be sure to monitor and stay aware of where you are at both in your career, and your retirement saving.