Retirement planning is not a priority for most Gen Zers. After all, people in their early 20s have so many other financial matters to think about—paying for college, making ends meet on a minimum-wage salary, and saving up for mid-term goals like buying a home. Still, it’s better to start thinking about retirement planning sooner rather than later.
The earlier you start saving and accumulating wealth, the easier it will be to meet your retirement goals, even if those goals are so far in the future that they hardly feel real at all. You don’t need to earn much money to start saving for retirement. Time is on your side! Here are some tips from WeRGenZ to help you start planning for your retirement today.
Determine Your Net Worth
Start by calculating your existing assets to obtain a realistic picture of your current financial standing. Assessing your financial health will help you determine any adjustments you may need to make to achieve your financial goals, like saving for retirement. First, Money Under 30 recommends calculating your net worth. Tracking your net worth over time will ensure that your finances are trending upwards. Your net worth is the value of all your assets—your car, home equity, savings, and investments—minus your debts. To calculate your home equity, Redfin explains that you should find your home’s current market value and subtract your remaining mortgage balance.
Identify Your Various Financial Goals
Setting financial goals for your future is an important step towards financial stability. When you know what you’re working towards, you’ll have an easier time putting money aside for the future and avoiding frivolous spending. But for young adults, deciding where to allocate their limited funds can be tough. Should you save for college or a future home? And where does retirement planning fit into the picture? Try to identify your most important goals and allocate a portion of your paycheck to different savings funds.
Start Putting Money Aside ASAP
Regardless of your financial goals, it’s best practice to start putting some money aside for retirement as soon as you realistically can. According to CNBC, only 39% of adults begin saving for retirement in their 20s. Saving early allows you to generate compound interest by reinvesting the returns on your investments. You don’t need to save hundreds every month to benefit from compound interest. Even if you can only afford to put aside $10 a month right now, you can begin building healthy retirement savings as long as you start young.
Open a Retirement Savings Account
If you haven’t already, this is a good time to start a 401(k) account. These retirement accounts offer many tax advantages and other benefits. Most importantly, contributions made to traditional 401(k) accounts are tax-deductible, meaning you can deduct the contributions on your tax returns and get more money back at tax time. Many employers will also match your contributions, helping you save even more towards retirement!
Spend Some Time on Estate Planning
Estate planning falls to the bottom of the list of priorities for most Gen Zers. While planning for death or disability is not something that any of us want to do, thinking about the future is essential if you want to take care of your loved ones should something unexpected occur.
Fortunately, estate planning is fairly straightforward for young adults. For example, you will need to assign a power of attorney to act on your behalf, make important healthcare decisions, and manage your financial obligations if you are unable to do so on your own. You may also want to draw up a basic will to direct where your assets and possessions will go if you die. Finally, consider purchasing life insurance while you’re young and healthy to lock in low premiums.
Although retirement might be far away, it pays to start thinking about it now. People in their early 20s are in the ideal position to start putting money aside, building compound interest, and using their money to generate wealth. Do yourself a favor and start planning for retirement today. You’ll thank yourself when you’re older!
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