Get a retirement account
College graduates presented with the option of retirement benefits through their first employer should look for a variety of investment choices, low fees on the investments provided and retirement education opportunities, Fragasso says. "There should be at least an annual education class ... [or] availability of 401k representatives to help council the individual employees on their choices."
Company-provided 401k plans often have the benefit of a company match, which can increase retirement funds dramatically over time. For those who don't have access to a 401k, and individual retirement account allows savers to take advantage of compound interest. Savers have the option of a traditional IRA, in which contributions aren't taxed until you withdraw them during retirement, or a Roth IRA, in which funds are taxed before being added to the savings, but withdrawals are not taxed.
Young workers generally have the most to gain by saving in Roth accounts. "For retirement purposes, a Roth is a really wonderful tool. It's tax-sheltered. It's all going to grow tax-free," Helm says. And in the case of an emergency, you can always pull out money you contributed without penalty or tax, he adds. The Roth IRA is a particularly advantageous option for young savers who are likely in a lower tax bracket than they will be upon retirement.
Students moving from job to job in their early careers can expect the money they've already saved to follow them, Fragasso says. "[Other] than the unvested portion of the employer's contributions, it's going to follow you, and you have the option of either rolling it into your new employer's plan … or doing your own IRA rollover."
The IRA rollover may be a smart option for workers changing jobs, Helm says, because it simplifies the number of accounts they have to manage. "Get [your accounts] consolidated into as few places as possible because it's a lot easier to keep track of," Helm says. He also warns that students should avoid pulling the money out of the account, as that can lead to fees that significantly reduce the money saved.
Develop a habit of saving
Simply getting started can be the most important step toward retirement -- and one of the most difficult. "No matter what the other pressing demands are, put something away, because when you get out of the habit of saving, you stay out of the habit," Fragasso says. Continuing that habit throughout a career is as vital as starting off right. "Consider that the horizon until retirement, while distant, is nevertheless finite," Fragasso says. "Figure out that every month you don't contribute for yourself is a paycheck wasted and the lost opportunity of compounding for decades on that money."
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Oh, and one more thing, youngsters.
Stop voting for politicians who compound the national debt at staggering levels instead of creating conditions that will compound your investing efforts.
Is grandpa making to much sense?
It has worked in the past.
Compound interest on what savings accounts pay less than 1 percent you would be dead by the time you're first dollar deposited doubles itself.
When you start that first job, and if you have not already done so, make it a habit to do the following right from the start:
1. Save an emergency fund - leave it liquid and leave it alone - it is for emergencies
ALWAYS keep yourself and your property insured. Health, property and disability
2. Once you have the emergency fund in place, contribute a material amount to your retirement, begin with 10% of your gross. The younger you are when you start, the less it has to hurt - compounding is your friend. Pensions are a rarity and Social Security might not be there - save as if you are going to be your only resource.
3. For every raise, put half of that raise toward an increased retirement contribution percentage
4. Watch account fees closely, do not take contribution holidays and for goodness sakes don't take a loan.
Consider items 1-4 a regular bill - it is not discretionary income. Any income after taxes and the items above is 'take home'. This mindset will guarantee you'll be living at or below your means.
5. Start saving an already taxed amount as you can - put that into good investments
Avoid consumer debt while you are at it...Home, car - fine, but other debt, be very wary - interest
can and will eat you alive. Debt is not good, but some types of debt are worse than others.
6. Ride out downturns and stay steady (do not panic sell) - enjoy contributing while the market is on sale
Somewhere in there, trade rent for a mortgage - do plan to pay it off well before you retire
Fast forward through life (it ends up going faster and faster, believe me) and eliminate worry about retirement replace worry with a pure enjoyment of your retirement years. Your senior-self will thank you for your effort!
Unless you are prepared to live in very very simple Spartan way, you will never be able to retire in all likelihood. Fish, forage, barter
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