Saving in Your 20s To Have More Security for Your 30s and 40s

6 05 2010

Source:http://www.moolanomy.com
In your 20’s and don’t think that you need to worry about your security later on down the line? There’s no need to worry about making yourself secure for once you reach your 30’s and 40’s, right? That’s probably the mentality of most people who are twenty-something. Most are in college or are just having fun and enjoying life. They probably believe that there’s no need to save money until they hit their 30’s or 40’s. But if you want to have more than the average retired person, then it would probably be wise to start saving before you hit the age of thirty-something.

You might want to consider this idea: if you begin saving say around $1,500 a year, beginning at the age of say, 25 years old, and you save this for 40 years, by the time you retire you would have $600,000 saved to tack onto your retirement pay. If you wait until you are 40 years old, you would only have $375,000 by the time of retirement. That’s a whopping $225,000 difference.

It’s important that someone in their 20’s doesn’t get into the habit of using the excuse that they have to pay off this loan, pay for rent, etc. Once they get use to using this excuse, the idea of saving fades faster and faster. The best way for someone to get a foot hold on saving would be to make sure to see if the company that they work for offers some sort of 401K program. Even if you can’t afford a lot of money to be placed in one of these investment plans, any amount will get you started on your way and eventually you’ll be able to increase the amount that you put in, once you have learned how to live differently depending upon your savings.

The two best things about a 401K plan is that not only do some employers match what the employee puts in, but also the turn around on the investment is far quicker than the interest you would get on a typical savings account. With a 401K plan, your employer will match up to about 3% of your income and the money is money that is taken from your salary before you are taxed by the government.

If it happens that the employer that you work for doesn’t offer any type of 401K investment plan, you might want to consider investing your money in a Roth IRA. How you fund these is through money that has already been taxed through your regular paycheck. So when you want to withdraw it at a later date it will be tax-exempt. You can put in as much of your salary as you want, up to $5,000. The Roth IRA can offer a potential to earn much higher return on your investment.

Although the thought of saving at such a young age may seem impossible, it would benefit all those twenty-something’s out there to stop and take time out to figure out some sort of savings/investment plan for the future. By the time they reach their 30’s and 40’s it will be second nature to save and will lead to a far less stressful life.


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