One of the most important things to consider is that it is never too early to start saving for retirement. Some may call you crazy but it should be known that the sooner you start saving, the better off you may be in the future! Because of this, many people start saving for retirement as soon as they graduate college. For some people, they may even want to start saving while they are currently enrolled in college. Is this a smart idea? Most analysts don’t believe so and think you should wait until you are out of school. Want to know why? Let’s take a look and find out.
The main reason why you should wait until after you get out of college to begin saving for retirement is that you may simply need that money for other important tasks! If the money you planned on spending is now tied up in retirement investments, you may need to borrow money for such tasks as actually attending school, paying for a place to live while in school or possibly after you graduate, and you may need to have repair work done on your car. These are only a few of the many scenarios that could happen to you while in college and because of these, it’s never the right thing to have all of your money tied up.
Because of the scenarios listed above, it’s important to remember that one of the best rules you can go by in life is to pay in cash while you can and avoid any potential debt. Why would anyone want to have to borrow money while investing in their retirement at such a young age while they are in school? No one should take out a loan to invest in a long term retirement plan. This isn’t always the best way to go.
After you finally graduate from college, this is when you should first build up a nice safety fund as well as pay off any additional debt you may have in things like student loans and credit cards. With no debt and a nice safety fund, you can ensure that you will be investing in your retirement comfortably and won’t have to worry about scrambling for money at any point in time.
Once you are out of college and have all of your finances in order, then you can start investing in your retirement with either a 401K plan that your employer may provide or a Roth IRA. As far as a 401k goes, be sure to go as high as your employer is willing to match. Anything above 3% should be considered for a Roth IRA. Although taxes must be paid on those investments, any growth within the Roth IRA is tax free. Most analysts say that your main goal should be to invest 15% of your income for retirement. By investing at least 15%, you should be able to live a very comfortable life by the time retirement comes along.
Besides going for a 401k plan or Roth IRA, there are other steps you can take after college to ensure that you’ll be able to retire fairly comfortably. For one thing, although it may be tough for recent grads with new higher-paying careers, always remember to live below your means. By doing so, you can save and invest a ton of money within the first few years out of college. Along with these steps, you may also consider hiring a financial planner who can help to put together a basic financial plan for your retirement. Take the proper steps and you should be able to retire with a nice size nest egg.
Author Bio: April Santos is a freelance writer who understands that saving for retirement is tough and wants you to Find Health Insurance Rates at a good price.