Getting ahead: planning your retirement in your 20s

Have you ever heard the old saying that it’s never too early to start planning for the future? If so, you may have decided to ignore it, or just worry about it later—after all, when you’re young you feel as if you have an endless amount of time to plan your life and that your time is better spent having fun and living for the moment. But the truth is, the future is coming faster than you might realize. When it comes to retirement planning, the phrase “never too early to start planning” can be the best advice you’ll ever get.

Sure, there are a lot of reasons why it’s especially tricky to start planning for such a far-off notion like retirement. The truth is, you’re likely just getting started in your professional journey, and you may have little to no idea where your climb up the career ladder will take you. Also, if you’re like most of us, the money you’re earning when you're new to the work world doesn’t exactly leave you with a ton of options for saving and investing for the future. On top of all this, it is much more fun to be carefree and live for the moment when you’re young, and many of us make a deal with ourselves to start taking money matters seriously when we reach a significant (and distant) milestone in our lives (age 30? 40? 70?).

That said, you really don’t have to completely overhaul your life or give up on fun in order to start planning for retirement but the more prepared you are for this inevitable end to your career journey the more confident and relaxed you’ll be about money matters at every phase of your life until then. Taking baby steps toward greater financial responsibility while you’re in your 20s will bring you that much closer to whatever your retirement goals turn out to be—and help you avoid (or at least minimize) the amount of fear, worry, and anxiety you feel when you’re focused on your financial health and future. And trust us, if those days aren’t here yet, they’re right around the corner.

If you’re ready to take the next step and get serious about your retirement planning, then consider the following strategies to move you in the right direction.

4 steps to planning for retirement now

1. Develop a saving mindset.

Sure, when you’re in your 20s it’s hard to take savings seriously. Most likely, your main focus is on getting your bills paid and being able to afford the basics, and that makes total sense. However, even saving just a little bit can go a long way.

Let’s take a look at a small example—suppose you enjoy a mid-afternoon latte each workday. The average price of a latte is around $2.50. Now, instead of buying the latte, imagine taking that money and dropping it into a savings account—in 5 years, you’ll have saved $3,250 just by making this one small life change. Are there other small savings changes you can make to help you build your nest egg? Probably, and the more money you’re able to divert to savings the better off you’ll be—both for short-term needs and for long-term health as you creep closer to retirement. But perhaps more importantly, just getting into a savings mindset early on in life will set you up for being a more financially responsible adult as you get older—and your ability and desire to save and spend wisely will set you up for a great financial future.

2. Take advantage of work resources

Most of us aren’t thrilled to have to work, but one of the good things about having to hold down a job is that it can often come with some useful employee benefits—which may include a retirement benefits plan. These days, more and more companies are offering a 401(k) plan to help employees save and prepare for retirement, which often provide some incredible perks like employer fund matching (which is as close to free money as most of us will ever get).

Taking advantage of investing in a 401(k) is so universally recognized as beneficial (and often essential) that many companies automatically enroll employees in plans to help them start saving their money wisely. If your company offers this benefit, there is absolutely no good reason not to take advantage of it—even if it’s just a small percentage of your paycheck. Don’t worry if you don’t plan on staying at your current job forever—you get to take your money with you.

3. Explore other investment options

In addition to the retirement benefits that your employer may offer, consider exploring other investment options available to you: IRAs, mutual funds, CDs, and the stock market. Sure, it’s a little scary to jump into the world of investing as a newbie, but there are a wealth of resources available to you, including online tools, wise and trusted friends and family members, and investment professionals tied to your bank (assuming you have a savings or checking account—and if you don’t, consider opening one). Do some research and start small. You’ll be amazed by how well a few wise investment decisions early on in life can set you up for a comfortable retirement.

4. Decrease debt

Debt is not your friend. Even though it’s often an unavoidable part of adulthood, be sure to make every effort to decrease your debt burden as you move closer and closer to retirement age. The truth is, some forms of debt—like a home mortgage—are indicative of financial stability and solvency. But other forms (like credit card debt) are best left avoided or eradicated as quickly as possible. If you have a credit card (or multiple cards), avoid using them unless it’s an unavoidable emergency, and pay off what you owe as quickly as possible. Nothing creates a financial headache and panic attack faster than an unwieldy amount of unhealthy debt—so be sure to avoid drowning here.