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You can firmly put retirement planning on the list of things I wish someone taught me in school. Throughout most of my 20s, I squandered away money on trivial things: new clothes, bar tabs, takeout food, any silly, excessive purchase you can think of. Like most people my age, I was living paycheck to paycheck with a blatant disregard for the future. I didn’t have financial goals that amounted to anything more than “pay for food this week,” and, “don’t forget to save enough to put gas in the car.”
Facing the Facts
It wasn’t until I was 26 years old that by the grace of Dave Ramsey’s Financial Peace University, I learned about the power of saving for retirement. I was exposed to crazy ideas, like saving 15% of your income for retirement, developing an emergency fund, and not running up staggering credit card bills.
These are lessons we would all do well to learn, but the thing that struck me most was that this was the first time I considered that I might one day be old enough to retire. I stood face to face with a complicated reality: I was going to get older whether I liked it or not. I could either start saving now or go about my senseless spending and pretend like the future will never come.
When we’re in our 20s and 30s, retirement seems a lifetime away. I barely know where I’ll be five years from now, let alone 30-40 years down the road. Perhaps this is one of the biggest reasons many people, myself included, fail to save for retirement when we’re young and in our best working years. Failure to relate to the older version of ourselves makes us less inclined to want to support that person in the future.
I had to force myself to take a step back and think through the tough questions, like:
- What kind of lifestyle do I want to have in retirement?
- Do I want to be forced to work during my golden years?
- What do I want my financial legacy to be?
- Do I want to retire at the traditional age or look to retire early?
Taking a few moments to think about my wishes for retirement helped me frame the picture of what I want those years to look like. It also forced me to consider what I need to do today to get there.
Facing the Numbers
Planning for retirement is more than finding the will inside yourself to want to support your financial future; it also comes down to simple math. The earlier you start saving for retirement, the sooner you can retire. If someone had told me at my first job out of college that if I started saving that very day, I could potentially retire 10, 15, or 20 years early, I would’ve said that’s impossible.
It’s not impossible; it’s the reality for anyone who has the foresight to begin saving at an early age. I hope to retire by age 55, or at least take several mini-retirements before age 65. I don’t plan to work my life away and want to use my time for endeavors of my choosing.
Which is why Saving for retirement early provides several vital things that allow you to create a stable financial future and a longer retirement.
Time is the most critical element of any retirement savings and investment plan for one reason: compound interest. At the core, compound interest is when your money makes money off the dividends you decide to reinvest instead of remove. The more time you allow for your money to stay in the market, the more years it has to grow. And the more you invest at an early age; the more significant your growth is when you’re ready to use that money for your next chapter.
There are many investment vehicles to choose from when you consider where you want your money to grow. Consider all available options, including any available through your employer (401K, 457, etc.), taxable brokerage accounts, or individual retirement accounts (IRAs). I choose to diversify using all three of these options. I also find it easier to set up recurring investments every month to remove the guesswork and make sure my portfolio continues to work for me in the background, regardless of the current economic climate.
As with any great financial move, the end goal is always to deliver freedom and options. Do any of us really want to be sitting behind a desk when we’re 60 years old doing the same thing day in and day out? I sure don’t. I’d rather not be forced to work during my golden years unless it’s something I’m passionate about. Instead, I’d like to be taking my hard-earned money, along with the money my money made, and do something amazing.
Starting to invest early allows you to move away from the 9 to 5 if you want and start something new. You may have goals similar to mine for your later years, traveling at will, spending time with children (and eventually grandchildren), taking time to learn new skills, and the list goes on. The freedom of ownership over the direction of your future is truly priceless when you p;an for it at a young age.
One of the biggest reasons I wanted to get myself in a better financial position is for my mental health. So much stress is brought on unnecessarily by poor planning and failure to save money. There were a handful of times in my 20s where I remember digging through canned food in the back of the pantry because I didn’t have any money to go out for food. I can remember many sleepless nights where my mind raced with the anxiety over how I was going to pay for the parking ticket I had just got because my credit card was maxed out, and I didn’t get paid for another week.
Creating a retirement plan early grants you the security and stability of not having to fret over minor fluctuations in income or spending. Developing a strategy and sticking to it will give you peace of mind and a lifetime of lower stress.
If You Can’t Start Young, Start Now
If you’re not in your 20s, 30s, or 40s, it’s not too late to start planning for retirement. The best time to start your retirement savings is your early 20’s, second only to today. And knowing everything you know now, why would you wait?
A sage man once said, “You’re off to great places! Today is your day! Your mountain is waiting! So get on your way!” When you start retirement planning at a young age, there are so many more mountains available to climb when you finally do retire. You can choose adventure and travel, entrepreneurship and starting a business, or being a devoted parent to your beautiful children.
So get going with developing your investment strategy by opening that retirement account, and setting up recurring investments, whether with your employer or on your own with an IRA. And from my experience so far, I can promise you won’t regret it.
Contributor’s opinions are their own. Always do your own due diligence before investing.
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