Retirement seems like it is forever away. After all, when you are in your 20s, the world is your oyster, and you feel invincible. But the simple fact of the matter is that, when you have responsibilities as an adult, time flies by far quicker than you realized.
Before you know it, you are at retirement age but don’t have the nest egg that you need. So, how can you be ready for retirement? It starts in your 20s. Here is how to start planning for retirement in your 20s.
Know Your Goals
Goals are great in just about any area of your life. When it comes to finances, they can clearly define what it is you are trying to do and by when. For retirement, setting goals is important because it gives you that clearly defined idea of what you need to have saved.
Set realistic goals and make sure that you have all of the proper information so that you can map out a plan. Consider things such as your current age, your current and projected income, the age you plan to retire, and more. Getting these ducks in a row means having the money that you need come retirement age.
Interest Is Key
Compound interest can really benefit your planning, especially when you start early. Basically, that money will grow due to interest over time at a consistent rate. There is no risk of the value declining; your money just continues to grow.
Know how much you have to invest and what your returns will be each year. This way, you can know the growth of your investment and you can plan it out accordingly.
Saving Now Versus Saving Later
Another advantage to starting the savings in your 20s is that it is more flexible for budgets. When you are younger, you can save less because you have longer to go. When you get up there in years and the deadline to retirement approaches, you have to save more. Start earlier and enjoy a bit more financial flexibility.