Of course, watching those provident early birds got me thinking about the financial importance of feathering our own nests for retirement.
Hereís the rub: For most twentysomethings,†saving for retirement†is typically far†far†down their priority list. Letís face it, itís tough to get motivated preparing for an event that wonít arrive for 30 or 40 years.
Heck, I know thirtysomethings ó and even a few†fortysomethings†who admit that they still have trouble setting aside a portion of their income for their golden years.
Are you well on the road to saving for a comfortable retirement, or does your retirement savings account balance sheet currently show five figures or less ó including the two digits to the right of the decimal place? If itís the latter, then itís time for a little reality check.
With that in mind, here are a few tips†that Iíve followed over the years that should help motivate you twentysomethings to stop procrastinating and start building your retirement savings as efficiently as possible (although many of these apply to us older folks too):
- Time is an ally of the young; donít waste it.†Compounding growth is the miracle that allows people of even modest means to build Brobdingnagian nest eggs; Albert Einstein famously called it the†most powerful force†in the universe. What he didnít say was the powerís maximum potential can only be unleashed by diligent investors with long time horizons.
- Donít leave money on the table.†Most employers who offer a 401(k) plan typically provide a company match up to a certain percentage of your contributions. Thatís free money ó donít leave it on the table!
- Make retirement saving painless (Part 1).†Eliminate the temptation to spend discretionary funds by†paying yourself first†ó and the best way to do that is by automating your†401(k) or IRA†deposits.
- Saving is easier when you make more money.†Well Ö itís true! If your retirement savings arenít growing as quickly as youíd like, then increase your income via a side hustle, or a part-time second job. And if you donít have the time, then try finding a roommate to help defray the rent or mortgage.
- Make retirement saving painless†(Part 2).†Every time you get a raise, be sure to allocate at least half of it to increase your paycheckís retirement deduction. Itís a great way to boost your retirement contributions over time.
- Donít get discouraged.†It takes most people decades to build a nest egg large enough to retire comfortably. Just remember, the odds are it will be a bumpy ride getting there; your retirement savings balance will most likely suffer from periodic market shocks that may result in large ó but temporary ó losses.
- Make retirement saving painless†(Part 3).†Instead of using your bonus or any other†unexpected financial windfall†to satisfy some need for short-term gratification, put it into your retirement account.
- Donít count on Social Security.†I donít care what those annual future-benefits statements you get from the Social Security Administration say. Unless there are big changes, the odds are that the Social Security Trust Fund will probably be broke before you retire.
- Be aggressive.†Remember, there are no guarantees in life; but if you want high returns, you have to take bigger risks. The good news is younger investors have the luxury of time to help them recover from potential losses that may result from chasing higher returns; older investors donít.
- Donít forget the wealth insurance.†Financially responsible people donít buy precious metals to make money ó they do it to†protect the wealth they already have. Buying, say, an ounce or two of silver every month ó or a much-smaller quantity of gold ó will help preserve your wealth if a catastrophic currency-failure occurs.
- Nobody cares about your retirement more than you do.†Ultimately, your retirement is†your†responsibility. Like it or not, that means the only person you can count on to feather your nest egg is†you. So get to work.
Photo Credit: bernadette macpherson morris