“Retirement? Why talk about retirement? I’m in my 20’s – it’s still 40+ years away! I have student loans and credit card debt to pay off. Maybe after that.”
Does that mindset sound familiar? Is retirement the furthest thing from your mind right now as you’re starting your first job? You’re definitely not alone. The median retirement savings for all working-age families in the US is only $5,000. The average savings is less frightening at $95,776, but, as we see by the median amount, doesn’t tell the whole story when you factor in no-savers and super-savers. 42% of Americans have less than $10,000 saved for retirement. In order to avoid retiring broke and take advantage of your golden years, you have to start saving in your 20’s. If these statistics alone haven’t already convinced you that you need to start saving for retirement as soon as possible, here are some other reasons to consider:
Compound interest adds up
The earlier you start saving for retirement, the more time your money has to grow. If you start saving earlier on, compound interest will allow you to save less during your first couple of jobs when you have less income to spare. If you wait until you’re older to start saving, you will have to save more each month than if you had started earlier and taken full advantage of compound interest. Starting early makes your money work harder for you!
You might be missing out on an employer benefit
Many employers offer to match up to a certain percentage of your earnings if you use it for retirement contributions. For example, if you place 3% of your income into a designated IRA or other retirement account, many employers will deposit the same amount into that account. Employers who offer this are essentially giving you a 3% bonus if you save that same amount for retirement. Free money if you do what’s best for you and save! How great is that? Employers who do this also help you take even more advantage of compound interest if you start early since a larger amount will be going into your retirement account.
Lower your taxes
Any contributions that you make to a 401(k), traditional IRA, or other employer sponsored retirement account are pre-tax deductions. This means that you will not be taxed on the amount that you contribute. If you’re contributing into a traditional IRA, the full amount that you contributed can be deducted when you file your tax return. If you contribute to a 401(k), the amount you contribute is taken from your paycheck before tax is ever taken out – and before you ever see it, which makes it less painful.
You could retire early
If you start saving early and build up enough money before the usual retirement age, you could retire early! If you start saving a decent amount at your first job when you’re 22 or 23 and give it 40 years to grow and earn compound interest, you could feasibly be able to retire early. If you start when you’re 40 or 50 years old, it is unlikely you’ll be able to retire early – it is even likely that you could have to wait and retire later than you had hoped.
Start Planning for Retirement Early with Patriot Federal Credit Union
If you’re ready to start talking about retirement but aren’t sure where to start, Patriot can help. Retirement planning is what our team of in-house financial advisors live for. Call or visit our website to schedule an appointment to go over what options you have to make the most out of your retirement by planning for it now.
The content provided in this publication is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Patriot Federal Credit Union does not endorse any third parties, including but not limited to, referenced individuals, companies, organizations, products, blogs, or websites. Patriot Federal Credit Union does not warrant any advice provided by third parties. Patriot Federal Credit Union does not guarantee the accuracy or completeness of the information provided by third parties. Patriot Federal Credit Union recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.