Even if you’re not planning on retiring for decades and decades, it’s never too soon to start planning for your retirement and getting yourself financially prepared for everything that you might face as you get older. Because in addition to providing for yourself when you’re not working anymore, you also need to consider things like the cost for medical care, assisted living, and much more.
So to help make sure that you’re ready for these things when the time comes, here are three tips for planning for retirement when you’re young.
Take Advantage Of Compound Interest
If you start investing when you’re young, one of the best things that you can take advantage of is compound interest. With compound interest, the longer you’re able to keep your investments in an account and accruing interest, the more money you’ll be able to build over time.
What this means is that even if you feel like you only have a small amount of extra income that you can devote to putting into investment or retirement accounts at this time in your life, that small amount of money will just grow and grow and grow over the years. So even if you’re able to contribute just a bit now, that bit can become very beneficial to you in the long run.
Contribute To A 401(k)
For most people, the most common form of retirement plan that they are able to contribute to once they start their first real job is a 401(k). So if you work for an employer that has a 401(k) available to employees, make sure you sign up for it and that you begin to contribute to it with whatever amount you can.
Especially if your employer has a matching program where they will contribute a certain percentage of your paycheck or match what you’re contributing to your account, you almost can’t afford to not put money into these accounts. If you’re not sure about these things with your current employer, reach out to HR to see what you have available to you.
Open A Roth IRA
Along with a 401(k), another retirement account that you can open for yourself is a Roth IRA. With this kind of fund, you pay the taxes on the money when you contribute it rather than when you pull the money out to use during retirement. This can save you from having to pay the tax later on when the rates might be higher. Additionally, you’ll know exactly how much money you have in these accounts since you won’t have to factor in paying taxes when you start to pull money out.
If you want to make sure that you’re as ready for retirement as you possibly can be, consider using the tips mentioned above to help you begin preparing for retirement now that you’re young.