Saving for retirement in your 20s may seem impossible. But regardless of what your budget priorities are, you should include retirement saving in your financial plans. Even a small contribution in your 20s will help your retirement plans. Why? Because you have the luxury of time for your money to develop.
Read on to learn more about why you should start a retirement savings account in your 20s.
You don't have to make a huge financial commitment to begin saving for retirement in your early professional years. When you are in your 20s, your two financial advantages are time and compound interest.
Even a small contribution to retirement can turn into a significant nest egg over the course of your career. The reason? The rate of growth resulting from compound interest is exponential. That means your earnings are added to your original deposit. A steady rate of return earns more each year as the principal increases.
The more time that your money spends in a savings vehicle, the more time it has to build principal and earnings.
1. Start saving. Don't procrastinate; there will always be reasons not to save. But experts agree that the best time to start saving for retirement is now, especially if you are in your 20s.
2. Participate in your employer's 401(k), especially if your employer offers matching contributions. This type of saving should become a priority. Most employers will match employee contributions up to a certain percentage of their compensation. By maximizing your contributions, you also maximize your employer's matching contribution — money that is rightfully yours.
3. Open a Roth IRA. If you do not have access to a 401(k), research whether opening a Roth IRA is right for you. Your contributions to a Roth IRA are made with after-tax dollars. Because you have already paid taxes on that money, your qualified withdrawals — including your earnings — are tax free. Be sure to consult your financial or tax advisor before you contribute to an IRA.
Getting started with a retirement savings plans is a great financial goal for your 20s. By the time that you reach your mid-30s, you may want to have the equivalent of a year's income in your retirement savings. Experts recommend that by the time you retire you have six to eight times your annual income in your retirement nest egg.
Let Synchrony Bank put its savings expertise to work for you. We offer several products that can help you start your retirement savings off on the right path. In addition to our award-winning customer service, customers also find that we have no minimum balance or monthly service fee on several deposit accounts. Our accounts are FDIC-insured up to $250,000 per depositor for each ownership category.
Browse all of our savings options, then contact a savings expert at 1-844-345-5789 to start your retirement savings plan.
New York Times: https://bucks.blogs.nytimes.com/2012/09/12/suggested-retirement-savings-goals-by-age/
*ANNUAL PERCENTAGE YIELD (APY): All APYs are accurate as of .
APYs are subject to change at any time without notice. Offers apply to personal accounts only. Fees may reduce earnings. For Money Market and High Yield Savings Accounts, the rate may change after the account is opened. For CDs, a minimum of $2,000 is required to open a CD and must be deposited in a single transaction. A penalty may be imposed for early withdrawals. After maturity, if you choose to roll over your CD, you will earn the base rate of interest in effect at that time. The APY shown for CDs and IRA CDs is for a 60-month CD with a balance of at least $25,000. Click here for all CD rates and terms offered.