If you are like most young adults, you are just starting out your professional career in your twenties. You may be considering how to get your career off to a great start and how to advance it so you can reach professional goals and aspirations. The last thing on your mind may be reaching the end of your career and retiring. Yet there are many reasons why young adults in their twenties should start saving today for retirement.
Increased Savings Over Time
There are so many stories today about people in their 40s and 50s who haven’t saved a penny for retirement. These are individuals who are forced to save large sums of money each month to make up for the last few decades that they did not save regularly. Saving smaller amounts over a longer period of time is easier on your budget than trying to save large sums of money later in life.
Maximizing Employer-Matching Contributions
If your employer has an employer-matching program in place, not taking advantage of that program is like throwing free money away. With these programs, your employer will match the amount of money you contribute to a retirement program up to a certain percentage.
Depending on your salary and the program your employer has in place, this may equate to hundreds and often thousands of dollars over the course of a year. Over time, this can add up to a very sizable amount of money. The longer you participate in such a program, the maximum your benefit will be from it.
You may choose to save your money in an interest-bearing savings account, in mutual funds, in high-yield dividend stocks, or a mix of all of these. These options all provide growth opportunities for your money over time.
Through the benefits of compound growth on interest and dividend reinvestment programs, your money saved today will grow much faster over time than money invested at the age of 50. Saving early not only provides you with the opportunity to save money, but also for your money to grow more.
Fewer Financial Commitments
Many young adults think they will have more money to spend and save later in their working careers, and so they delay contributing to a retirement program or saving for the future. Young adults often do have credit card debt and student loans.
In your later years, though, you may have even greater expenses such as a home mortgage, the expense of children, and more. It is not uncommon for a person’s expenses to grow as their income grows. So getting in the habit of saving now is advantageous over delaying your savings efforts.
Improved Financial Security
Having money in a retirement account, in a savings account, in the stock market, and more improves your financial security. While there may be penalties for withdrawing money early from a retirement account, these are funds that can be used if you lose a job or face some other financial crisis.
Further, the recent economic crisis has taught us that it is best to save early and regularly. Many people in recent years were forced to delay their retirement plans until the recession ended, and this is particularly true of those who had counted on the stock market to grow at a steady rate as part of their retirement planning. When you save early and diversify your savings, you have a larger buffer against economic fluctuations.
There are many reasons why you should start saving early. Take time today to review your budget and establish a plan to save regularly each month.