According to the Federal Citizen Information Center, fewer than half of all Americans are specifically saving for retirement. As a cash-strapped young person, you may feel that you can’t afford to set aside money for retirement. You may also think you have plenty of time before you need to worry about saving for your golden years.
But there are easy, painless ways to start saving for retirement even when you’re in your 20s. The best news is, a little money invested now will pay off big down the road.
One of the best deals around when you’re young and saving for retirement is an employer-supported 401(k) plan. You can have up to 15 percent of your pay deducted before you ever see it. Many employers will match a portion of those savings, essentially giving you free money for your retirement. And, the money you contribute to your 401(k) retirement savings is tax-deferred, which can make a big difference come April 15.
You can invest the money in your 401(k) in a number of ways, depending on your employer’s plan. Most provide several mutual fund options with varying rates of return, depending on how safe the investments are. Compounding interest will really add up over time, so even small contributions on your part are a big first step toward saving for retirement.
One benefit of saving for retirement when you’re young is that you can afford to take bigger chances with your investments if you so choose. You have a lot of years to recover from downturns in the stock market; over time, the market has historically trended upward.
You also can establish your own Individual Retirement Account, or IRA. This may be a good way to start saving for retirement if your employer doesn’t have a 401(k) plan. As with a 401(k), the interest is tax-deferred.
Consult a financial advisor for more information on saving for retirement. Remember, a little big of savings now can mean a big payoff down the road.
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