The truth about saving money for retirement is that it is NEVER too early to start saving money for retirement. What people may not know at an early age however is how to start saving for money for your retirement. The biggest problem with finding out later in life that you hate your job and want nothing more than to sip drinks on the beach is the fact that it takes years and years to build wealth and if you decide too late you want to retire young, you may have missed the boat.
So no matter how old you are there are certain categories in which most people should look to when it comes to basic money management and learning how to start saving for retirement. How you disperse your cash into the categories depend completely on a case by case basis depending on age, risk tolerance and current economic situation. So the most important thing anyone can do is learn, educate themselves so that they are empowered to make the right decision for themselves at the given time. Also to keep in mind that once down one path does not mean you cannot change courses. IF you want to save money for your retirement you may change your plans every so often. This is healthy! Adjustments are needed just like time changes, some markets go up and so go down. You can be as active or passive as you want to be when it comes to learning how to start saving for your retirement, the key however is that you are in fact saving. As long as you are doing that, you are on the right path.
The most common path for retirement is a 401K or 403B contributions. This pre tax option is very successful because it is automatically done and you learn to pay yourself first rather than waiting until after all of your bills are paid off to see how much you have left. Most people see retirement as a secondary concern meaning that when money gets tight no money gets saved for retirement. This is not a good thing. You need a consistent strategy if you plan to save money for your retirement AND retire at an early age. If your company is offering a matching 401K option this is free money for you and at the very least you should match the company matching contribution amount.
If you are starting out at a very young age the company you are working for may not be offering a 401K option but this does not mean you cannot save for your retirement. Your best option would be to invest in a Roth IRA. A Roth IRA will grow tax free over the years and you have more control over what your money is invested in. There is limitations to how much you can put into your IRA year to year but this is a great way to start saving and to continue to add into as you age. Unlike normal stocks or mutual funds you purchase where you need to pay out taxes each year on your gains when you sell, Money in an IRA is completely free of taxes so you can buy and sell or just let it sit and accumulate year after year and pay no taxes as the original money you invest is after tax income.
These are the most common paths people take on their way to learning how to save money for retirement however other options exist. Passive income streams such as dividend earning stocks or CD laddering are very good methods that people learn to live off the money earned from their investments without touching the investment itself. These strategies take a large sum of capital to be successful however so generally require a long time to develop the overall plan.
The bottom line when it comes to learning how to save for your retirement is that the sooner you can start the better. The more risk you can take on at an early age, the better and being able to educate yourself on the process will help you learn when and why you need to modify your retirement investment strategy as time passes on. Money has a balance. When one market goes down another goes up. Learning the ins and out will help you in the long run manage your wealth properly to retire and hopefully retire at an early age!
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