In your 20s, you may think you have all the time in the world to save for retirement.It can be tempting to spend your entire paycheck, particularly if you're entering the workforce and have debt or other spending priorities. But this is the time to create the savings behaviors that could boost your retirement readiness in the future.
Your age is your biggest advantage in your 20s. Saving early gives you the opportunity to make your money work for you with compounding interest.
“Many young people need education and one-on-one support to help them get on track and stay on track with retirement savings goals,” says Chuck Cornelio, president of Retirement Plan Services for Lincoln Financial Group.
Cornelio offers tips to help young people take action and save for retirement:
• Start now. One of the easiest ways to save for retirement is through an employer-sponsored retirement plan, like a 401(k) or 403(b) plan. Whether you're starting a new job or interviewing for one, check out the retirement plan benefits offered by your employer.
And as soon as it's available to you, enroll. If your company doesn't offer an employer-sponsored retirement plan, consider saving in an individual retirement account (IRA). Most local banks have an IRA solution that could work for you.
• Save at least to the match. Many employers will match your contributions up to a certain percentage. Save at least up to that match amount. When you don't take full advantage of a company match, you're leaving money on the table.
• Create a budget. For many, entering adulthood means managing one's own finances for the first time. Along with saving for an emergency fund, create a monthly budget that allows you to save a small percentage towards your retirement savings plan. A few dollars from every paycheck can make a big difference down the road.
• Resist taking money from yourself. Life happens and you may need cash to pay for unexpected expenses. During these times, you may be tempted to borrow against your retirement savings or take out the money altogether. By doing so, you may miss out on potential market gains. You could also incur taxes and penalties for money withdrawn or for not paying back a loan.
• Make more, save more. The more you earn, the more you should save. When you receive an extra bump in cash from a bonus, pay raise or another pleasant surprise, consider putting that money towards your retirement savings.
• Seek help. You may need help with identifying the investment options and savings goals that are right for you.Schedule an initial meeting with a financial professional and then commit to annual check-ups to talk about your savings progress.A Lincoln Financial Group participant satisfaction survey found that retirement confidence increases with access to guidance from a financial professional, such as a retirement consultant.
For more savings tips, visit www.LincolnFinancial.com.