When you're young and you start your first job the last thing on your mind is planning for retirement, but believe it or not, that is the best time to start. While it may seem like a long way off and you may feel like you have plenty of time, taking advantage of the additional time will give your money more time to work for your future. The sooner you start building the stronger your retirement portfolio will look. Here are a few suggestions for the first steps toward retirement planning for your future:
Take Advantage of Free Money
Most companies now offer a 401(k) plan where they can match your contributions dollar for dollar. As long as you contribute enough to get those matching dollars you'll be getting free money that can boost your investment even higher. One of the first steps toward retirement planning is discuss your plan with your employer's HR department to find out how you can get the maximum benefit from the plan; if you're self-employed start with an individual 401(k), a SEP-IRA, or a profit-sharing plan.
When and How Much
Try to save as much as you can and as often as you can. When you're planning for 30, 40, or 50 years into the future it is difficult to anticipate how much money you'll need so your best approach is to put away as much as possible. Retirement accounts grow not only as a result of your deposit but also by compounding interest so the earlier you put your money in the more time your money will have in earning extra dollars from compound interest payments.
Try Other Forms of Investing
The truth is that there is only so much you can put away into a 401(k) before it is maxed out. If you want to add more to your IRA then you might also want to invest in an IRA or a taxable savings account. You can also consider investing in a brokerage account to give your savings a boost. If you're not entirely sure of what types of funds are available consider discussing your options with an investment adviser that can help you to compare your options.
What If You Change Jobs?
Ideally, you'll stay on your same job until you're ready to retire but in this day and age that is highly unlikely. The days are long gone when dedication to a job would last 30 or 40 years and you could retire with recognition from your employer. Today, it is not uncommon for people to stay on one job only a few years and then transition to another one. When that happens you're usually given the option to cash out your 401(k) or to roll it over. While it may be tempting to get some ready cash in your hands it is best for your future if you roll over your 401(k) to your new employer. If your new job doesn't offer the same or a similar plan then work with your bank or financial adviser about getting an individual 401(k) set up.
Taking the first steps toward retirement planning takes more than just putting money away for a rainy day. You have to think about how much money you need in the future and learn how to make your money work for you. Once you've begun to build up your nest egg, you'll feel more secure about everything else in your life.