If you're a young professional, retirement might be very far off from your mind because you may feel that it's not something critical, right? But, in reality, it's never too early to start planning for it. Your future financial independence may rely on how early you're able to prepare. Those who have a solid plan that they're able to stick to may likely stop working early if desired.
Preparing for retirement in your 20s gives you a lot of time to plan. At this time, you have many options, such as investing in gold and silver. You may want to dabble in real estate or start your own business. It's also the best time to develop good saving habits and compounding. The following are easy ways on how you can start planning:
1. Seek A Retirement Advisor
If you feel like you can use some help, a retirement advisor may be able to help you come up with a customized retirement plan for you. A retirement advisor will first sit you down and ask about your assets if you have investments and others of monetary value. If you're a savvy investor, you may want to explore investing in precious metals through reputable organizations, such as Oxford Gold.
Precious metals are known to be hedges against inflation, and they're easy to liquify. They can also be a way to diversify your assets. If you have a 401K or traditional IRA, you can convert to gold or other precious metals.
2. Save 10% Of Your Gross Income
Saving for your retirement in your 20s gives you a head start. You can begin setting aside 10% of what you earn. But, if you want to give yourself an advantage, advance it to 15% instead. Sometimes, people start late when planning their retirements because of financial responsibilities. You can also contribute more to your employer's retirement account or individual retirement accounts.
3. Limit Your Expenses
If you can't save enough, it's best to consider cutting back unnecessary expenses. Setting a budget on both needs and wants will allow you to add to your savings more. If you're married, you'll need to make a compromise with your spouse so both of you can adapt the habit that will help make your money last.
Itemize your monthly expenses and find ways to reduce your expenses to necessities. You can do this gradually, but it will serve you well to only spend on household necessities.
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4. Reduce Your Debt
Debts will slow things down on your end, so paying off debt or getting rid of liabilities should also be your priority. You may need to work longer, but knowing that your monthly payments with interest will end is worth it. You might wonder if it's better to pay off your debt right away; well, it is if it's a credit card loan as the credit card company will hound you.
But, if you're paying off a mortgage, you can consider it a low priority if you're getting a tax deduction on mortgage interest and you're paying a fixed rate. Consider paying off your mortgage if you have no other immediate debts, have emergency funding, and if your retirement year is still far away since today's mortgage rates are low.
5. Ensure You Outlive Your Money
The last thing you want is to run out of savings when you need it the most. There are ways for you to make sure that it doesn't happen. One is to wait past your retirement age to collect social security benefits. In return, you get delayed retirement credits that increase monthly benefits up to 8% until you reach 70 years old. And, to make your savings last longer, only spend up to 5% of it annually.
Conclusion
It's important to start planning your retirement while still working and at the peak of health. Many fail to do this because of other plans, such as traveling or purchasing their own place. But, years can pass by so fast and you might entirely forget about preparing for your twilight years. It can be troublesome when you're old, with failing health. It's not only burdensome to you, but to family members who have to take it upon themselves to care of you. Retirement planning can prepare you for your future.
