Step 1: Define and prioritize your goals
If you’re just starting your career, or five to 10 years into it, you may be paying off student loans, starting a family, or saving for a down payment on a home. With so many financial obligations, many people delay saving for retirement until it’s too late to make up for lost time.
You need a plan that allows you to start saving early in your career, greatly reducing the financial burden and uncertainty later in life. “I work with a lot of clients who are in their 20s and 30s, and they are trying to plan for the long term,” says Kelly Kratz, a wealth management advisor for TIAA-CREF. “All of their dreams are different of course, but it can be a challenge when you’re trying to balance your life and figure out where you should be putting your money right now. Should you be saving for education, other things, now? How should you prioritize your retirement?”
Working with a financial advisor to develop a step-by-step action plan with realistic savings goals can help you balance your spending priorities.
Step 2: Save regularly — don’t wait for the “perfect time”
A common mistake is waiting for that “perfect time” to start saving for retirement. Remember, there’s no such thing as a perfect time for investing. The sooner you start saving, the more time your earnings can potentially grow through compounding in a tax-deferred account, such as a retirement plan or Individual Retirement Account (IRA).
Important points to consider:
Step 3: Make sure you’ve set up your retirement plan the right way
Once you determine how much to contribute, decide how to divide up your money among different investments, such as stocks, bonds, real estate and guaranteed accounts. This requires determining your goals, when you plan to retire, and your tolerance for short-term losses caused by market fluctuations.