It is never too early to start planning for your retirement. Whether you’re 20, 30, or 40 years old, there is always something to be done to prepare for retirement. It may seem backward to start thinking about your end goal this early, but the best time to start planning is as soon as you get your first paycheck. Planning for your retirement preparation when you’re as young as 25 means you have time to start building good habits and compounding savings. With compounding, you can save a little now and reap big rewards later. Here are some tips to saving for retirement when you’re young.
Start Saving Early
Start saving your money now, and let compound interest have an opportunity to work in your favor. Knowing how to live below your means is a beneficial habit to learn when you’re young, following you throughout adulthood. Your goal should be to live on only 85% of your income. The additional 15% should be put away into some form of savings or investments. It is also important to keep track of your spending. Seeing exactly how much money you’re spending and earning will help you make smarter financial decisions. There are many apps and spreadsheet templates available to help you track your spending and income.
Take Advantage of Your Employee Benefits
If your employer offers a traditional 401(k) plan and you are eligible, it may allow you to contribute tax-free money, which can be a significant advantage. A 401(k) is an investment account that will continue compounding throughout your career based on the stock market state. Matching means that your employer will contribute a certain amount of money in addition to what is taken out of your paycheck. Roth 401(k) features use income after taxes rather than pre-tax funds. If you chose this plan, you should consider what your income tax bracket will be in retirement to help you decide whether this is the right choice for you.
Consider Investing in the Stock Market
Investing, in general, is a good idea for those who want to make the most of their income. Stock investment requires some research and effort if you are to do it successfully. But even if you do it by way of buying into a professionally traded fund, it’s a good idea to funnel some income toward investments that can earn significant returns over the years.
Contact Bowman & Company Today
Bowman & Company CPA, PC provides all of our individual and small business customers with experienced, accurate, and affordable financial services. Our financial services aim to decrease your taxes and increase your net worth through responsible, timely, and accurate record keeping. We offer our services to clients throughout the Washington, D.C., metropolitan area, including Maryland and Baltimore County, Columbia, and Howard County. For more information on our offerings, contact us online or call us at (410) 381-8121. You can also find us on Twitter, Linkedin, Facebook, and Youtube.