Putting money into a retirement fund is yet another chore adults must manage. Like many of our other responsibilities, saving for retirement becomes a consistent habit we must maintain for years and years to come.
Much like paying bills and going to work each day, tucking money into a retirement account is critical. Not only does it affect our current state of affairs (e.g. withdrawing money from our paychecks each week) but it also directly affects our financial futures.
Even though retirement is decades away for us millennials, our financial futures matter a great deal. Our paychecks each week definitely affect us now but the money we set aside for our future selves is going to affect us a whole lot later.
At GenTwenty, we want you to be prepared for retirement. Before you know it, you’ll be halfway through your career without a penny saved for the future. We don’t want that to be you, and that’s why we are sharing five solid reasons why you need to save more for your retirement now:
1. Saving more now means saving less later.
When you’re young, there’s less at stake. Sure, you’re probably renting an apartment with friends or thinking about buying a house, but most of us twenty-somethings have little in the way of bills. If this describes you, now is the time to save for retirement.
Putting 10% (or more!) of your earnings towards your retirement fund will only benefit you later. Consider how generous you can afford to be now when you have the energy to work full-time and financial freedom to do so. Later on, you’re bound to have a mortgage, kids, and limited dollars after all of your bills are paid. In short, the younger you start saving, the better off you’ll be later!
2. The sooner you save, the sooner you can retire.
Assuming you do save as much as possible early on, by the time your career is coming to a close you’ll actually be able to retire and enjoy retirement at an earlier age! Traditionally, folks retire in their mid-sixties.
However, if your company of employment offers an option for you to retire sooner and you have the money stashed away to live comfortably, you could possibly retire earlier than the average worker! How’s that for a reward?
3. A matched contribution yields a greater value.
If you’re fortunate enough to work for a company that offers matched contributions to your retirement fund, you’ll benefit significantly.
Think about it: you’re in your twenties and tucking money away. After a year or two of service, your company decided to opt in and match your contribution up to a certain percentage (e.g. 3%, 8%, etc.) and now you’re adding twice as much into your account!
The sooner you begin contributing, the sooner your company can match you. It’s a great incentive to build up your retirement funds early on!
4. The earlier you start, the longer compounding can work for you.
A millennial and a middle-aged worker saving the same amount of money at the same interest rate actually earn significantly different saved funds overtime.
Interest on retirement accounts compounds, meaning that the interest accrues to an amount of money and in turn accrues interest itself. To simplify, let’s say a twenty year old and a forty year old save $200 per month until they retire at age sixty-five. At a 6% interest rate, the twenty year old would have saved $551,199 while the forty year old would have saved $138, 599. (See this chart for clarification).
Now, this is an estimate but still validates how important it is to start saving for retirement earlier! That’s a $412,600 difference! Though a hypothetical example, the performance between each contribution is significant!
5. A well-maintained retirement fund offers financial freedom.
There’s little more comforting than knowing you have a safety net when it comes to money management. Having a retirement fund that is consistently maintained and growing overtime offers workers reassurance and less stress.
Knowing that a lump some of money is waiting for you as you career comes to a close not only helps to avoid stress-related health problems, but it’s also a mental break.
Having strong financial freedom is empowering for everyone, and definitely a state you want to find yourself in someday!
Saving for retirement is something too many of us neglect to do early on. Even though statistics show millennials are saving, we all need to make sure we are maximizing our contributions and heavily putting money into our accounts.
Check to see if your employer offers a match program. Assess your earnings and deductions to see if there are things you can cut back on (e.g. Starbucks coffee, anyone?) and instead put that money toward your retirement account.
Is it “fun”? No. Yet, it is necessary and will protect the financial security of your future circumstances.
We all want to retire early with a beach house in the Caribbean (or some related fantasy that puts our toes in the sand and guarantees us long, lazy days of pure rest & relaxation). The only way to get there is to make sure YOU are doing everything you absolutely can to protect yourself and plan ahead.
Before you know it, your retirement fund will grow, so long as you are maintaining it responsibly.
The GenTwenty family believes in you. Go out there and save!
(P.S. If you are struggling with maintaining a budget and cutting back on expenses, we highly recommend this course: Minimal Budgets, Maximum Living* by Lydia Lois. *Indicates affiliate link.)
What ways do you make saving for retirement fun?
Can you think of any additional reasons why this should be a priority for millennials?