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Why You Should Plan for Retirement in Your 20s and 30s
Any good financial planner would advise people to begin planning for their retirement as early as their 20s and this tends to confuse some people. Why, they ask, is it necessary to start arranging for your 60s or 70s almost fifty years ahead of time? The answer is simply: time. Never again in your life will you have the chance to enjoy such a long-term opportunity. Additionally, most people in their 20s and early 30s are in a position to invest in retirement on a very aggressive basis, meaning a considerable portion of their income, which really pays off down the road.
Most of us know the old adage “the early bird gets the worm” and this is no more true than where retirement investment is concerned. All strategies for retirement are developed on both long and short term goals and when someone begins contributing as early as their 20s they are really giving their portfolios a chance to fatten up and yield great results.
What should my retirement plans include in my 20s and 30s? This is a great time to take advantage of employer sponsored programs such as a 401k programs, but it is also a time to consider your assets. There is nothing to compare with the equity of homeownership, but not everyone is ready to purchase a home in their 20s. They can however, begin saving for a down payment and making some plans for the time when they will be able to afford this key asset.
Additionally, many people forget that their retirement plans should also include their estate plans, and in your 20s or 30s you should also draft a will and acquire a good life insurance policy.
All of these arrangements are key during this time period because it is generally one in which income is stable, but financial pressures are fairly limited. Once an individual is married and has a family there may be pressures or needs that make it more challenging to take an aggressive approach to investing and this brief period of freedom can really serve to make a great difference in the years to come.
Additionally, when someone in their 20s or 30s opts for pre-tax investment options through their employer they tend to get used to the absence of this money, and this sets them up for a healthier investment outlook because their regular contributions become a habit they will not break.