Posted in Personal Finance

Start Saving Early For Retirement

Retirement can seem terribly far away when you are in your twenties and even thirties, but saving as early as possible for your retirement will undoubtedly give you the most success. Personal finance expert Suze Orman made this point crystal clear during a recent interview by stating that contributing $100 per month to a Roth IRA account from age 25 provides you roughly one million dollars at retirement, but beginning the very same contribution at age 35 provides about $300,000 at retirement. When faced with the fact that waiting ten years to begin saving can so easily cost you $600,000 the need to plan and save for retirement at an early age clearly becomes crucial.

Once you start saving, don’t stop for any reason that isn’t considered a legitimate personal financial crisis. If you do find yourself in a crisis financially, possible help is here: When starting a new job, there is usually a waiting period to join the company 401(k) plan, but keep saving on your own in such an instance by adding as much as possible to a Roth IRA. Another option if you are married is for your spouse to raise their 401(k) contribution during the time that you are unable to contribute.

Most finanancial advisors recommend saving at least 10% of your salary, and more is optimal if you can afford it. Many retirement plans give you the option to ask for an automatic increase of the percentage you save on a yearly basis, so you can opt in to this and raise your savings rate by 1-2% per year and hardly notice it, particularly if you receive yearly raises or productivity bonuses.

If you leave a company you have been with a while, you may take your retirement savings with you, and most employees that are 100% vested in the account may briefly be tempted to “cash out” those funds. It is imperative that you resist the urge to do this and instead choose to keep that nice amount that you have already worked hard to save for retirement. If you attempt to “cash out” and you are under age 55, there is a 10% early withdrawal penalty and you will owe income taxes on the full amount of the account, so the actual amount you would receive after taxes and fees is much less than the total amount you may have been expecting. It is a losing proposition in comparison to leaving it with your former employer or moving it to a new employer’s plan. Always make the smart choice to keep your retirement savings invested so you may benefit from the accounts once you reach retirement.

Remember to save early, keep saving, and don’t access your retirement funds until you are retirement age.