Never Too Early for Retirement Planning!

I have absolutely no desire to “work” for the rest of my life. But the way my bank account is set up…. Umm yea, I’m no Drake, so my bank account is hardly looking like early retirement. More and more I’ve been thinking about the importance of planning for life after my 9 to 5. It’s never too early! In fact, even at the age of 25, I feel like I have some catching up to do. In my planning process I came across some helpful tools and tips that I really want to share.


The first step I took was to research what we (young adults between 20 and 30) will need to retire comfortably. CNN Money has a Retirement Calculator which only requires a few simple inputs and provides a breakdown of how to achieve the expected amount needed for a comfortable retirement. According to CNN, if I retire at the age of 67 (in the year of 2056) I will need $870,655 ($2.3 million if you consider inflation) to live. Based on my calculations, someone 25 years old, who plans to retire at 67, would need to save roughly $288 every two weeks to meet this goal. That’s almost $600 a month, which is quite steep for many; hence the importance of utilizing the different retirement investment vehicles available to you.

One of the best ways to start saving for retirement is to take advantage of employer retirement plans. Depending on the nature of your job and their benefits package, you may be offered the opportunity to participate in a 401 (k) or 403 (b) plan. These plans generally will offer an employer match on employee contribution for a certain percentage of the employee’s salary. For instance, if the terms of the plan allow for a 50% match up to the first 5%, your employer will contribute 50 cents on each dollar you contribute. In this specific scenario there is an annual limit of 5% of your gross salary that the employer will match. Therefore, an employee with a salary of $50,000 that contributes at least 5% to his/her 401(k) plan will receive a matching contribution from the employer of $1,250. You can see how this creates more bang for your retirement buck!

If your job does not offer a retirement plan as a part of their benefits package, there are other options available. These are called Individual Retirements Accounts, often referred to as IRAs. There are several different types of IRAs. They have slight differences, but ultimately serve the same purpose. They can be used as a supplement or as a singular retirement savings instrument. I could go on for a quite a while talking about the difference, so I‘ll save a little for next time. Next week, I’ll focus in on the details of how IRAs work as well as give you an idea of the personal impact from a tax perspective. This week I just want to emphasize the significance to retirement planning. Poor planning can result in undesirable circumstances. So the earlier you start the better off you will be!