Top 7 Retirement Strategies to Follow in Your 20s
Retirement is never far enough. Start planning in your 20s and you will reach retirement with enough money to live comfortably and enjoy activities you never had the time for. It all comes down to strategy. Follow the tips below and get started on the right path today.
1. Get a 401(k).
The 401(k) is a retirement account that allows you to invest money without paying taxes on the gains until you reach retirement age. The yearly limit is higher, too, making it an ideal investment. It is offered by employers, who may also offer to match your contributions up to a certain limit. If you are self-employed, you can start your own 401(k) under your registered company name.
2. Open an IRA.
An IRA is similar to a 401(k), just that contributions are lower. Also, you can invest in almost any stock, bond, ETF, or other traditional investment that you fancy. You have more control over your money and you do not have to go through your company.
3. Clear your debts.
Invest in yourself. Pay off any high-interest rate debt and settle everything that you owe. The money you pay in interest can help you more if you place it in savings or investments.
4. Save some cash.
Keep an emergency fund outside of your retirement accounts to cover any unexpected expenses. Most people go into debt when there is a sudden medical emergency or unforeseen crisis. If you have emergency funds, you can easily remain afloat and support yourself.
5. Invest aggressively.
Investment markets are volatile. However, you are in your 20s – you have plenty of time to wait for the market to recover again. Experts recommend being at least 80 percent invested in stocks in your 20s because you have 30 or 40 years to recover from those short-term scary stock market downturns and still make plenty of money.
6. Automate Your Savings
Automatic withdrawals that go straight into your retirement or savings accounts are the best way to stay disciplined. Set it up with your work or bank and meet your money goals every time.
7. Stay motivated!
Planning for your retirement at age 20 is an incredible thing to accomplish. Keep an eye on your account and watch it multiply with time. Use your success to motivate yourself more and keep at it. Compound gains will only make you richer, give you more flexibility, and create the life you want to have in retirement.