Even if you've recently acquired your first job, it's never too soon to start planning for retirement. Retirement may be decades away, but it's a period where you rest and enjoy your life without the stress of working. It's also a time when you have no income stream, which means your money is limited. Hence, this is why you need to take saving for retirement seriously. In this article, we'll be helping you get your finances prepared for retirement early.
Knowing when to start saving and planning for your retirement will take strategic planning. Many people wind up swamped on the best time to do so. The truth of the matter is that you can start at any given time. Everyone's situation is different, so the best time is ultimately up to you. Though, it's best to start as early as possible.
If there's one thing that can kill your retirement fund, it is having lingering debt. Whether it's from credit cards, personal loans, and even HELOCs, you don't want to have all this debt to pay off when it's finally time to hang up the uniform. One form of debt that absolutely takes priority is student loan debt. As you know, student loans can accumulate so much debt in such a short amount of time while taking years to pay off. In fact, student loan payments can also make it difficult to finance your monthly expenses.
But how do you go about funding such a large amount? You can look to refinancing your student loans to rid yourself of lingering education debt. Student loan refinancing is a process where you take what you currently owe and turn it into a new loan with more favorable rates and lowering your monthly payment. Since we're talking about retirement, it is a great way to have some extra financial security, reduce the interest rates, and make paying off your monthly expenses a little easier.
You can set up an automatic transfer between your primary account to your retirement account. This is done to ensure you never miss a deposit. It will happen on the same time each month. Whether it's from your side hustle or your primary paycheck via direct deposit, you're all but guaranteed to set aside money for your retirement.
Retirement funds should never be used to pay for a big expense, namely in the event of an emergency. Whether it's to pay for emergency vehicle repairs, fixing extensive water damage or medical bills, you need to keep your personal finances out of it. The best way to do this is to set up an emergency fund. Emergency funds are individual piles of cash used only in the event of a crisis. Life can be unpredictable at times regardless of what phase you're in. Post retirement or not, it pays to be prepared in the event of an emergency. It's highly recommended you have at least six months’ worth of expenses put away.
A retirement plan is when a lump sum of money is given to an employee during their time in the workforce. Once they retire, they can benefit from the funds generated during the time they worked. However, that's just the basics of it. There are many different types of retirement plans, but they depend on the company offering them. Most employers offer a traditional 401k, which is the standard retirement plan.
A 401k is a type of tax deferred account that an employer pays each month for their employees. The funds come from the paycheck and are untouched by taxes. The only time taxes are applied is when the money is inevitably withdrawn. There's another form of a 401k called a Roth 401k, which is when taxes are used to fund an account and can't be used until you reach a certain age. While you can still technically withdraw the funds, you will face a penalty if you're not the appropriate age. Make sure to research the different types of retirement plans, so you can find the jobs offering them.