Why and How You Should Start Saving for Retirement Before You Hit 35

by Brazen Life

The news is full of articles about how few baby boomers are prepared financially for retirement. Yet many retirees have plenty of money to get through their golden years. Why are some baby boomers financially prepared for retirement while others are not?

The answer lies partly in getting started early — which is why you should thinking about saving for retirement now. When you’re in your 20s or 30s, retirement can feel like a long way away, but you’ll see in the strategies we’re about to go over that this is actually the best time to set yourself up financially. (Click here to tweet this thought.)

Here are eight techniques for financial planning that will ensure you’re comfortable when you’re ready to retire:

1. Invest systematically based upon your investment goals

Systematic investing provides discipline to save regularly rather than arbitrarily. It helps reduce the risk of timing the markets and brings down the average cost of your investments.

So how do you invest systematically? By creating a budget. A budget will allow you to manage your economic resources so you can make conscious decisions about spending.

You must spend less than you earn and save the difference. You can build your own program, participate in your employer’s retirement plan—often called a 401k—or find another program run by an investment firm.

2. Harness the power of compounding

Compounding means generating investment earnings from investment earnings. This is incredibly effective over the long haul—so much so that once you understand how it works, you’re likely to join in.

Here’s an example from LearnVest: If, at age 33, you invest just $100 each month and earn 1.5 percent annual interest, that money will turn into nearly $60,000 by the time you’re 70. Powerful, right?

3. Look for an employer that supports your goals

The best companies to work for usually have great employee benefit programs. Those programs may include 401k retirement plans with matching contributions, employee stock purchase plans, and, although this is becoming more rare, defined benefit pension plans.

If you are lucky enough to have several job offers, these perks should go into your decision-making process. The right employer can help you reach your financial goals.

4. Maximize your contributions to retirement vehicles

Many great employers who provide retirement savings plans match a certain percentage of your contribution. However, they often do not match the maximum you can contribute.

Many employees only contribute up to the employer match, foregoing the maximum tax deferral allowed by Uncle Sam. If you’re self-employed, you have a number of options to save for retirement there, too, including an IRA. If at all possible, max out on these contributions, and you’ll see a huge return down the line.

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