o, you’ve graduated from high school or maybe you are fresh out of college and in your first full-time job, and the last thing you’re probably thinking about is retiring. That’s understandable, because it could be 40 years away, or more! Getting your first real paycheck is exciting, but more than likely you’re more concerned with paying your rent or your student loans than you are with saving for retirement. Please remember, however, that it’s the decisions you make early in your career that can theoretically set you up for a financially successful future. The earlier you start saving and investing—regardless of the amount—can make a big difference down the line.
When you’re in your 20s and starting your first real job, retirement may seem light years away. But then, suddenly, you’re 60 and retirement is right around the corner. Preparing for a financially successful future takes time and an appropriate investment strategy for each stage of your life.
When you reach your 30s and 40s, it is critical to grow your retirement assets. By this time, when careers are generally well established, you should save as much as you can afford in your retirement account. It’s vital to contribute as much as your employer will match. Instead of defined benefit plans, it is more common to have an employer-sponsored, defined contribution plan such as a 401(k), 403(b) or 457 plan. These plans can be an excellent way to save, but we are only now witnessing the first wave of “401(k) retirees” who will live off of this type of savings. It remains to be seen whether these defined contribution plans will meet the retirement savings needs for anticipated longer life spans. Your goal during these middle years is maximum growth of assets.
Now, if you’ve reached your 50s and haven’t started actively planning for your retirement yet, don’t be discouraged. There may still be a plan that will work for you, and the material you are about to read will help you in this season of your life. If you have been preparing for your future, but don’t know what to do next, we will cover topics that apply to you when we cover Phase 2, the accumulative phase of financial planning. Regardless of your age, it’s time to get started on the ideal track with your best footing, The Fast Track to Retirement.
Ideally, you should start planning for retirement as soon as you get your first job, so you can reap the full benefits of compounding interest. Landing a good job is only a small part of being able to build wealth and being successful. It is just as important to manage your money well and start saving in order to make it work for you. Even if you are not making a lot of money, cultivating the right financial habits can prepare you for building wealth and being successful. The habits that you start out with are the ones that will follow you throughout your life.