Piggy Bank

Retirement savings—a topic that many people (especially younger ones) tend to overlook. Everyone seems to think they have all the time in the world until, all of a sudden, they are turning the big 6-0 and realize that they haven’t even begun to save for retirement. Social Security just doesn’t cut it for most people, so some form of retirement savings is a must. Many people get discouraged and fear that it is too late for them to start saving. Well, I’m here to tell you it’s NEVER too late. Of course, the earlier you can start, the better, but just because you aren’t in your twenties anymore doesn’t mean that you still can’t start to build a nest egg!

This will be the first blog in a two-part series of blogs digging deep into the facts about saving for a comfortable retirement. This first blog will focus on “Millennials”, those young bucks in the workforce who are just starting out. The second will focus more on the “Baby Boomers” and “Generation X”, those nearing retirement age.

Most of the young twenty-somethings aren’t really thinking about retirement. Many of them are just completing their higher education and just entering Corporate America. They are literally just starting to work, so the last thing on their mind is retiring and no longer working. How young is too young to start saving for your golden years? The answer may surprise you—never! You’re never too young (or too old) to start building or growing that nest egg.

So, how can you maximize your retirement savings?

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The first idea is simple. START NOW! The longer you keep putting it off, the less time the money you contribute has to compound and grow…and growth is what you want! Check out the incredible power of compounding. If you were to start investing $1,000 per month from the time you are 25 until the time you reach 35 (10 years) into an investment account which earns 7%, by the time you are 65, your account will be worth nearly $1.5 MILLION! That’s AMAZING. That $120,000 you invested increased over 10-fold!

Say you get a later start and decide to invest the same amount monthly which will earn the same amount of interest for the same 10 years as above, but you don’t start saving until you turn 35. Surely 10 years can’t make that BIG of a difference. Think again. Your investment account will only be worth around $730,000 by the time you turn 65. You’re same $120,000 only increased about 6-fold. Still pretty good, but not nearly as good as investing sooner and giving the money more time to do its compounding thing. Compounding is an amazing thing, but the major contributor is TIME. For Millennials, this is great news. If you start early, you could definitely be a millionaire come retirement!

The second way to maximize your retirement savings is to take advantage of your company’s 401K. Many companies offer their employees the opportunity to contribute to a 401K. Take advantage of this opportunity to begin saving for your future. If your company’s 401K is a traditional 401K, you’ll actually see some immediate tax savings from your contributions. Your contributions will be “pre-tax” meaning that they will actually lower your earnings for tax purposes. Some companies even encourage employees to save for retirement by offering to match employee contributions up to a certain amount. If your employer offers a 401K match, you should DEFINITELY be taking advantage of it! Not maxing out your employer match contributions is the same as refusing free money. Who doesn’t love free?! Sure, starting out you may not make a whole lot, but if you can at least contribute enough to max out your company’s match, you will definitely be thankful later down the road. As you begin to move up the ranks in your career and make more, increase your contribution amount. This way, your savings will increase as your salary increases.

Don’t stress out if your employer doesn’t offer any sort of retirement savings plan, there are other options out there like Roth IRAs and traditional IRAs. These can help you to save for retirement and money will compound and grow as previously discussed. Both traditional and Roth IRAs offer some pretty nice tax benefits. Check out my previous blogs talking about the details of each from back in September and the beginning of October . All of the different savings methods can be a little overwhelming. Wealth Builders CPAs & Consultants can help! Wealth Builders is a team of financial professionals. We live and breathe all things financial. Let one of our experts help you to plan for your retirement years no matter what age you are right now! Remember, it’s never too early (or late) to start to save! Call our office for a free consultation.

Remember to tune in next week to check out our blog explaining how to maximize your retirement if you’re already nearing retirement age. Remember to follow us on LinkedIn, Twitter and Facebook to catch all the latest tax news and tips!

 

“10 Tips to Help You Boost Your Retirement Savings—Whatever Your Age.” Merrill Edge, www.merrilledge.com/article/10-tips-to-help-you-boost-your-retirement-savings-whatever-your-age-ose.

Reiner, Matt. “What Millennials Can Do Now to Maximize Retirement Savings.” The Balance, 28 Aug. 2017, www.thebalance.com/how-young-adults-maximize-retirement-savings-4126299.

Tweddale, Alaina. “If You Still Don’t Believe In The Power of Compound Interest, You Have to See This Read More at: https:www.moneyunder30.Com/Power-of-Compound-Interest.” Money Under 30, 27 Feb. 2015, www.moneyunder30.com/power -of-compound-interest.