When to Start Saving for Retirement
Everyone says to begin saving for retirement as soon as possible, but is that always true?
Know the Right Time for You
The “best time” to save for retirement isn’t the same for everyone. Some may begin when they’re still in school, and others may not find themselves in a position to save until they’re much older. Your ability to save may also depend on your job security or current debts you need to eliminate.
Take heart that you’re not behind the curve. It’s best to start saving when you can, not when others say you should, especially if it puts you at risk of going into debt, which does more harm than good.
Set aside time to properly evaluate your income, your current savings, and if additional money can be safely put away. Even saving small amounts for retirement when you’re younger can add up to a lot in your investments accounts in the decades to come.
Make Consistent Contributions
It’s impossible to time the stock market. The best way to save for retirement over time is to invest the same amount each week or month. This makes sure you’re getting access to a range of stock prices. The strategy is called dollar cost averaging and it’s a smart move for long-term investors.
If you’re not sure what types of stocks of funds to invest in, consider choosing a target date fund with your brokerage. You simply enter the date you plan to retire, and the fund manager will diversify your holdings to an appropriate level of risk for your retirement timeline.
Take Advantage of Tax Benefits
Contributing to an eligible retirement account like a 401(k) or Traditional IRA can help lower your tax bill. Even if you’re young, those deductions on the contributions you make can significantly lower your taxes, meaning more money in your pocket.
Also check to see if your employer offers a match for your 401(k). This means that if you make a contribution to your retirement savings, the company will match that money up to a certain amount. In other words, it’s free money that has years to grow and help you enjoy a healthy cash flow when you’re finally ready to retire.