How to Start Saving for Retirement While You’re Young

According to CNBC News, Americans should aim to have the amount equivalent to a full year’s salary in savings by age 30. By age 40, they recommend having up to three years’ salary tucked away. While these are the recommended values, the reality of the situation is much different. In fact, by 35, the average U.S. adult will have just $9,600 in their savings account – an amount well below their annual salary.

While this is the current norm, there are steps young people can take to reverse this trend and have plenty saved for retirement when the time comes. Here are a few tips to get your savings on track and to do it while you are still young.

Meet With a Financial Advisor

Again, the average adult isn’t saving enough for retirement. Perhaps even more troubling, only 60% of U.S. workers are saving anything at all. The key to getting back on track is to establish a good base.

Start by understanding your budget and cash flow. Meet with a financial advisor to discuss your income, expenses, debt, credit, and current savings (if any). From there, you can establish a more detailed plan.

Consider Investment Opportunities

The best time to invest in stocks is when you are young. Sometimes, trading stocks may be a high-risk venture. Taking a higher risk while investing in stocks has the potential to yield a bigger reward. Those in their 20s and early 30s have the luxury of time. If a high risk does not pay off, you have years to earn back what you have lost.

Invest in a broad range of stocks, including domestic, international, small-cap, medium-cap, and large-cap stock options, for the best results.

Plan for the Unexpected

In addition to retirement savings, you need a separate emergency savings account – even when you are young. Plan ahead for emergencies and have plenty of funds tucked away for the unexpected.

These emergency funds may come in handy should you get in a car accident, have a health-related emergency, find yourself unexpectedly unemployed, or if you get a divorce. Just about half – or 40 to 50% – of U.S. marriages end in divorce. A large number of U.S. workers found themselves with significantly reduced hours at work or collecting unemployment over the course of the past year.

Don’t let emergencies put you in dire straits or leave your credit in shambles. Contribute to an emergency savings account dutifully, and be prepared should the worst happen.

Look Into Ways Your Employer Can Contribute

Often, employers will offer you the option to enroll in a corporate retirement plan called a 401(k). While some employers set a limit, you can contribute as much or as little up to a certain dollar amount to this plan. Some employers will match your contribution or contribute a percentage to buoy your funds.

Employers often set aside time to discuss retirement plans with eligible employees. Attend any meetings or seminars that go over your benefits in detail.

Think Before You Buy

Small and large purchases add up — and they can have an incredible impact on your ability to save for retirement.

Remember, purchasing a $4 coffee five days a week can set you back nearly $1,000 per year. On the flip side, large purchases can also devastate your finances, however necessary or important they may be. If you are making a large purchase, like purchasing a home, car, or engagement ring, take your time and do your research. Over one-third (35%) of couples will spend three months or less planning the purchase of an engagement ring. Nearly one-fourth, or 24%, however, take their time carefully planning out the decision and will take four to six months to settle on the right jeweler and perfect engagement ring for their future fiance.

If you are young, the best time to begin saving for retirement is right now. Get started by meeting with a financial advisor, setting aside money for emergencies, investing in stocks, and knowing the full extent of your benefits at work.