So many people believe that, because they have a long time until they retire, they don’t need to worry about retirement savings just yet. Unfortunately, that couldn’t be farther from the truth. Of course, wanting to put off this intimidating savings goal makes complete sense.

Trying to map out what type of retirement you want to live (and save for) is daunting, especially when you have a laundry list of financial “to do’s” to achieve long before then. From student loan repayment to purchasing a home, to raising a family and helping to save for your children’s college education, you have a lot on your plate! Saving for retirement may seem like it falls at the very bottom of your priorities list.

Although it’s easier to ignore retirement savings until you feel a little bit more financially stable, that’s not in your best interest. Even if you’re not considering a traditional retirement, the sooner you can start saving to support whatever lifestyle or secondary career you choose to pursue in your golden years, the better.

Time In the Market

When people ask when they should start to save and plan for retirement, we always tell them that the sooner they can start saving, the better off they’ll be. That’s because, when it comes to investing:

The longer your investments are allowed to grow, the more interest they’ll earn. The more interest they earn, the more that interest will earn. This concept is called compound interest which I’m sure you’ve heard about. What many people haven’t heard and what is truly the secret to wealth-building is the IMPACT of compound interest. Why is it SO incredibly valuable for investors to take advantage of?

Investopedia has an ideal example of how compound interest impacts your investments:

If you’re 25 years old and you want to save $1 million by age 60, you’d need to start investing a little bit under $600 every month to reach that goal. However, if you are 35 years old and wishing to reach that number by age 60, you’d need to invest just over $1250 each month. And if you’re 45 years old? You’d need to invest close to $2000 each month.

Those numbers should be a clear indicator that, even if we “only” put off investing for a few years, it makes a huge impact on our ability to reach our long-term financial goals with ease.

Setting Reasonable Goals

If you’re a millennial who is ready to start planning for retirement, it can help to set some goals for yourself. However, it’s wise to be reasonable going into this journey. There will be ups and downs over the course of your many years in the market, and there will be some months (or years) where you’re able to contribute more than others. That’s okay. Instead of setting high standards for yourself that are unreachable at the onset of your retirement savings path, focus on attainable, bite-sized goals.

This is where determining a percentage of your salary to save each month or year can be helpful. You might even start with the basics – contributing to a workplace retirement plan, or setting up an individual retirement account (IRA) to contribute individually. From there, you can always expand your approach and get creative with the types of investment opportunities you pursue to diversify your portfolio and grow your wealth. Just make certain that YOUR SAVINGS is a bill you always pay to yourself each month. That one piece of disciplined living will do more for your net worth than any other daily habit.

Understand Risk

When you’re younger, you’re more likely to take on risk in your investing portfolio. This is true for several different reasons. First, you have more capacity for risk in your portfolio because you have more time to recover should you experience losses. Second, you’re likely able to tolerate more risk because you know you have more time between now and when you actually need the funds in your investment accounts.

In other words, you’re less likely to make a poor decision about your investments because you’re anxious or upset about a market downturn as you near your retirement. Finally, remember that risk isn’t necessarily a “bad” thing when it comes to investing. It only means that you’re taking on an investment that has the potential to experience a loss in relation to its potential to grow in value. As a millennial preparing for retirement, it’s wise to work to understand just how much risk your portfolio can comfortably take on, and what that means for your investing strategy.

Talking to a Professional

As you get started investing for your retirement, you may feel overwhelmed with options. Even if you’re planning to start saving with small contributions, it can help to speak with an investment advisor to develop an investing strategy that works for you right now and can be adjusted with time as you get closer to your retirement. It helps to talk with someone knowledgeable and trustworthy to learn more and have a partner in building wealth.

Contact us today! We’d love to hear from you.

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