Preparing for Retirement in Your Early 20s

Having a stress-free retirement with more than enough money to retire with should be what we all strive for. When it comes to investing and saving, millennials have some advantage over other age groups, as they have more time to save up. However, a study revealed that millennials have unrealistic retirement plans, where 15% thought winning the lottery was a viable retirement strategy while 11% expect to be gifted retirement money. You need a strategy to plan for retirement in your early 20s.

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This is a proof that people in their 20s are not adequately prepared for their retirement, even though they are the ones known to struggle with retirement savings. In this post, we will highlight tips on how you can get started in saving up for your retirement as early as now.

Start saving today

The first step is to start saving now by opening a savings account. Most employers offer a savings vehicle, like the 401(k) or 403(b), that you can take advantage of and put some money in for your retirement as early as now. Depending on the company match rules, it can yield an immediate 50%+ return on investment. There is also an option to open a traditional IRA or Roth IRA that automatically deducts money from your paycheck to be transferred into your retirement account. Start by saving at least 10% of your gross income and work up from there as your paycheck increases over time.

Freedom from debt

The fastest way you will be able to save enough for your retirement is by getting out of debt. Most millennials are still managing their student loans while incurring other liabilities by getting a high-interest credit card. You will not be able to start saving enough if you are still worrying about paying some of your debts off. It’s time to look at your list of liabilities and find the most effective way to repay them. Be smart in getting loans or credit cards. If there’s no need to get one, avoid it as much as you can.

Invest in long-term opportunities

Millennials must start placing their money on viable long-term opportunities with high returns, such as forex mb-2016-06-graphtrading. There are various reasons why forex trading is alluring for young investors. First, it has a low risk aversion compared with other opportunities. Second, it works perfectly with conservative trading systems where you can cap losses effectively. Lastly, it requires technology to implement strategies, which millennials have high affinity for. The most important variable in investment is creating a diversified portfolio.  Do this by looking at other opportunities where you can place your money.  Target investments include dividend growth, stocks and real estate.

Hire a reliable financial advisor

Do not do it on your own. There are reliable services you can get to benefit from your savings and investments, such as seeking a financial advisor. This professional will help you manage, track, and provide advice to you.  This will help you achieve financial freedom as well as your future goals.  Make sure that they understand your goals.  Another tip is to make sure that they work with other millennials.  Having this experience under their belt will help ensure that they serve your best interests.

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7 thoughts on “Preparing for Retirement in Your Early 20s

  1. Why on earth would a young millennial hire a financial adviser? If you don’t have any experience in investing, you wouldn’t know what to look for in a financial adviser and by the time you did know what to look for, you could do it yourself!

    When you’re young, the most important thing to be doing is accumulating savings. It’s really that simple. Spend less than you earn and SAVE the rest.

    You can put all of your money into something as simple as Vanguard Total Stock Market Index Fund and effectively own a small slice of every company in the United States.

    Or, you could invest in a Target Retirement Fund.

    Or, you could put your money in a robo-advisor like Wealthfront or Betterment.

    The key is low fees.

    Forex trading sounds like a horrible idea.

  2. Agree with all of the above and absolutely do not hire a financial adviser. Do it yourself. It’s extremely simple.

  3. While I agree with your other points about savings and getting out of debt, I have to side with the other commenters and say that I don’t support the idea of hiring a professional financial adviser in your twenties. Unless you’ve got plenty of money and know exactly what you need from them, you should be making informed choices about your own finances and not spending out on things like that.

  4. Agreed, a 20-something should be preparing for retirement: by getting the best college education or vocational training possible.. And by thinking about how s/he is going to punt when her job becomes obsolete or moves offshore.

    But hiring a financial advisor? That comes under the heading of “premature.” If you’re earning enough that you can put money in savings, put it into a low-load index fund — Vanguard or Fidelity, for example, and let it sit there.

    And establish and start maxing out a Roth IRA NOW. Much better to pay the the taxes upfront, while you have a job and can afford it, than to be forced to make required minimum drawdowns in old age, when the taxes are a hardship, or to leave money to your kids that’s going to have a big chunk cut out of it because it’s in a regular IRA.

    If I had it to do over again, I’d put a LOT more money in Roth IRAs; I would’ve rolled as much as possible out of the IRA and 403(b) into an IRA, and I would have put more money into regular brokerage accounts and less into tax-deferred instruments. Defies popular wisdom…but just you wait. 😉
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  5. I wish there had been someone financially responsible in my friend circle when I was in my 20’s. When I think back about all the things I didn’t know about money and interest and bills and controlling my cash instead of spending it like it was on fire …it horrifies my current self.
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