Start a 401k in your 20s
Jessie recently landed her first job after graduating from college. She couldn't wait to start. Her excitement turned to anxiety, however, during the human resources orientation. Talk of saving for retirement through participation in the company's 401k plan sounded like a foreign language to her. "I'm only 22," she thought. "Do I really need to be saving for retirement already?"
If you're in your 20s you may also struggle with socking away money for a retirement that is decades away. After all, there are so many other things to be paying for! A place to live, transportation, gas, food, clothing, internet and a smartphone likely take the lion's share of your paycheck.
Don't shortchange your future well-being
Starting now may make all the difference in retiring when you're ready. Why work more years than you need to, just because you didn't plan for retirement when you were young?
For example, if Jessie starts contributing $200 a month at age 22 and earns an average annual return of 7 percent, she will have accumulated $758,518 when she is ready to retire at age 67. However, if she waits to start saving for retirement until she is 42 and earns the same return, she will need to contribute $936 monthly to reach the same nest egg by age 67.
Regular savings started early can go a long way over time. That's why it makes sense to take advantage of the 401k when you start your first job. Many companies also offer automatic enrollment and automatic contribution increase features that make participation easy. Be sure to contribute at least enough to your retirement account to get any matching contributions your employer may offer, as that is essentially free money to you. For more information on the benefits and options of your employer-sponsored retirement plan, talk to your plan's administrator.
We can help
If your employer doesn't offer a savings plan, you should still begin saving for retirement early. Visit one of our branches or speak with us at 1-800-288-3425 x8429 to learn about more retirement savings options.
- Fundamentals of retirement planning
- IRA or Roth IRA - which is right for you?
- Make a smooth retirement plan rollover
- Eight simple estate planning steps
- Don't get hit by retirement sticker shock
- Start a 401k in your 20s
- Five easy steps to help maximize IRA savings
- Understanding the Social Security System