It isn’t too surprising that the time when we really start thinking about retirement and planning for it is middle age. Perhaps it is when we have our lifestyles pretty well defined, perhaps the career is where you want it to be and the kids are here and growing up that you start looking down the road to the future. Perhaps it is looking toward the future in terms of insurance, planning for college and other issues such as this also gets your mind moving on how you will be ready when retirement gets here.
But if we were able to step back above our lives, the best time to start preparing for retirement is not the middle age years. Retirement planning experts tell us that if young people in their twenties or even teens can start putting a little bit back toward retirement, the rewards when they reach their golden years will be phenomenal. If a youth in his early twenties or teens were to just put one percent of what they make back, and that money stayed in some form of investment vehicle that would grow into a retirement account, the growth between the time of investment and retirement at 60 or 65 can be explosive even at a modest interest rate.
Unfortunately, few young people are looking that far ahead when they are in their early adult lives. That is a time when the transition from teen years to family life is pretty all consuming. So it might be the responsibility of parents and older advisors to help youth see the value of starting to work on their retirement savings well in advance so they have a well-developed program when their retirement years come along.
One of the best places for a young person to start their retirement program is with the 401k or retirement benefits at their job. Now, in the last decade, many businesses have eliminated retirement benefits where the company pays for the retirement. But if the young person works for a company that offers 401K, they can set aside a percentage of their income and it will be put into a retirement fund before taxes. Moreover, often the company will match the funds up to dollar for dollar and the company will manage the investment of the funds as well.
The outcome is a healthy and rapidly growing fund that starts out with an immediate doubling of the invested funds and then grows steadily over the years as more is put into the fund with each paycheck. The young worker gets used to the retirement money coming out so they adjust their budget to live without it. And without giving retirement much more thought than that, within a few decades, the 401K can evolve into a very impressive retirement account to be sure.
If you are a young person and you are considering if you might think about starting a retirement account, congratulations. You are one of just a few people who have the foresight to think about retirement this early in life. And by starting now, you take advantage of the thing that is your greatest asset – time. Because if you only put a little bit back, that can grow and grow and grow and become a sizeable retirement nest egg for you and your spouse even if he or she is the spouse off in your future.