If you want to retire at some point in your life, you need to have savings (cash and investments) to live on when you stop working. I am not counting on social security. I don’t advise you do either. If you are saving today, great. If you are not, today is day one.
Starting early is the key to easy retirement savings. Compounding interest is an amazing thing, and it will be featured in a later post. Your job is to feed the fund that you will live on in the future. Think of it as paying yourself. You pay the power company, the cable company, the cell phone company, and so on. Why not pay yourself?
If you work somewhere that has retirement matching, TAKE ADVANTAGE TO THE FULL BENEFIT! I get 100% match on the first 3% I invest in my 401k. I take full advantage. That is like free money from my employer. You should do the same.
If you are not doing this, start today. Chose one of the accounts I describe in my investments accounts post. Any account 401k, 304b, IRA, Roth IRA, or SEP is better than no account. Talk to a tax adviser about which one is best for you.
The important part is to take out the savings automatically before you get a chance to spend it. It is easier to take the money out without thinking than to invest manually. To do this, enroll in you company’s payroll deduction (contact HR). If you do not have this as an option, setup direct deposit at an online bank (I use ING). That account will have the option to set up a bill pay or automated, scheduled transfer. You can use this bill pay to pay yourself.
Make a commitment. Decide where you are going to start today. I invest 10% of my paycheck. My goal after graduation from MBA school is 15%. You can do that, or more, or less. Pick a number. Pick the highest number you can afford. Make a pledge to yourself that you will start investing in your retirement today. Set it up. Stop thinking about it. Don’t make any excuse. It really is that easy.
