by Katie G
Have you ever wondered when you should start saving for retirement? Or even how you should be saving for retirement? Retirement funds are something that will become extremely important to you when you plan your retirement. Picking the right saving/investing methods and the right time to start can be confusing, but will only end up benefiting you in the long run. Since these things are so important, it’s extremely important to start saving for your retirement when you are young in order to make sure you have stocked away enough money for yourself to be able to live with no income.
So when is the best time to start saving? ASAP!! You can start saving in a retirement fund at the age of 18. You can also talk to your parents about opening up a custodial Roth IRA so you are able to start saving before the age of 18. The earlier you start saving, the more money you will have to live off of after retirement.
Once you have a secure job, most businesses offer 401K’s for their employees. This is a retirement fund that allows employees to dedicate a portion of their pre-tax income to a savings account (a pre-tax salary is your salary before you pay the required taxes). There are many tax benefits to 401K’s. The money that is invested into a 401K will not be taxed until you withdraw the money at retirement. Your tax contributions are not considered to be a part of your overall salary. This means it could potentially put you into a lower tax bracket, allowing you to be able to pay less in taxes. Lastly, normally in a regular retirement account, your savings are taxed; however, in a 401K your savings are kept tax free, allowing it to grow to a larger size than in a regular investment account.
So why should you start saving at such a young age? By saving money as early as possible, it gives you the highest chance for your money to grow as large as possible. Even if you start saving at a young age and stop after 10-20 years, all the money you have already saved will have grown interest, making the total money you have available after retirement larger. A visual of this situation is shown in the graph below. This allows you to be able to enjoy your retirement. Who knows? Maybe you want to move to Hawai’i and live on the beach for the rest of your life. Who doesn’t want that?
In conclusion, start your retirement fund as soon as possible! Talk with your parents about opening up a custodial retirement fund if you are under 18 so you can jump ahead of your savings. Find out what account works best for you, whether it be a Roth IRA, 401K, etc, and save up as much money as possible so retirement will be a breeze for you!
Works Cited
“Benefits of Starting Early.” Capital Group, americanfundsretirement.retire.americanfunds.com/planning/benefits-of-starting-early.html#:~:text=When it comes to retirement,take advantage of compound earnings.
By, et al. “Meet the 18 Year Old Who Has More Retirement Savings than the Average 50 Year Old.” NewRetirement, 21 Mar. 2019, www.newretirement.com/retirement/meet-18-year-old-retirement-savings-average-50-year-old/.
Folger, Jean. “The Benefits of Starting an IRA for Your Child.” Investopedia, Investopedia, 19 Mar. 2021, www.investopedia.com/articles/personal-finance/110713/benefits-starting-ira-your-child.asp.
Loudenback, Tanza. “Here's How Much More Money You'd Have for Retirement If You Saved $100 a Month Starting at 25 Instead of 35.” Business Insider, Business Insider, 26 Apr. 2019, www.businessinsider.com/personal-finance/retirement-savings-start-at-25-vs-35-2019-4.
Segal, Troy. “The Complete Guide to the Roth IRA.” Investopedia, Investopedia, 19 Mar. 2021, www.investopedia.com/terms/r/rothira.asp.
Swinney, Andrew. “A Beginner's Guide to Understanding 401ks.” Accounts with Big Rewards and Small Town Service, www.kasasa.com/blog/401k-guide/.
“When Should I Start Saving for Retirement?” Chris Hogan, www.chrishogan360.com/investing/when-should-i-start-saving-for-retirement.
Great post! This was the best, most helpful description of a 401k I've heard! I found the part about how they are not taxed so you could potentially be in a lower tax bracket with a 401k really interesting, because it is those little things that you don't think of right away when it comes to accumulating wealth. Of course, I agree with the conclusion and points about starting to save as early as possible! It's so important to start accumulating interest on your savings as soon as you can!
ReplyDeleteI agree with everything you mentioned! Saving for retirement is one of most important things as you need to make sure that you will be stable once you are retired and are making no income. Did you know that around 35% of Americans don't have any money set aside for retirement? That's insane. Every single person should have a retirement savings account and should start saving at a young age just like you said! It is never to early to start saving up money for retirement.
ReplyDeleteThis was very informative and ties very well into what we're learning right now. I think that it was a good point that you expressed urgency to the fact that we should start saving now, as compound interest and investing over several years adds up over time. Who else could people talk to about starting this account besides your parents? I know there's a consent factor at the bank if you're under eighteen, but would you also recommend talking to some kind of financial advisor to find the best fit for you (Roth IRA, 401k, etc.)?
ReplyDeleteIt was nice to read your blog as I already knew some of the stuff you were explaining. Every time I read something about the retirement fund, I gain more understanding of actually how important it is to create one at a younger age because the longer you have it opened and put money into it the more you will have for retirement. Your blog was easy to read and I also learned a lot about the 401k and how there are no taxes so it could potentially put you in a lower tax bracket and help you financially. Overall, your blog just proves the point of how important it is to save as early as possible!
ReplyDeleteThis blog post was great! It really got my attention. I agree with you 100% that everyone should start getting for retirement as early as possible. I also believe that many of the people that are reading didn't realize the affect it has from not starting at 35 and starting at 25 when it comes to saving for retirement.
ReplyDeleteI was talking to my parents a couple of weeks ago, and we both thought about opening a savings account. Ever since I saw this graph in class, it really inspired my to open an account. Its just amazing how much money you can save just on a 10 year difference!
ReplyDeleteYour blog brought up a lot of familiar information that people often ignore. You should have included a better title, one that relates to your post specifically. But overall, the tips you wrote about are valuable. I learned a lot about 401K and I plan on utilizing it in my life to start saving at a young age.
ReplyDeleteThis is a great Post! You had tones of information that is going to really help me. Especially everything about the 401k which was really interesting. Though I already knew some of these thing, my knowledge of saving has been greatly expanded by this post. What age do you have to be to open up your own, personal account?
ReplyDeleteGreat job! Saving for retirement is such an important life skill and how to best build a large sum of money for retirement can be hard or even intimidating. Your information on a 401K was great and will help so many people better understand how they can save for retirement. Your tone throughout the blog helped to make saving for retirement less stressful and more approachable. However, I wish you would have had a title that related better to your topic so even more people could read and learn from this great blog you wrote. Nice job!
ReplyDeleteI like the topic you chose because it is relevant to what we are learning now in Personal Finance. Your descriptions of the 401K and the RothIRA actually helped me gain a better understanding of what we are learning, because the different characteristics of each can get confusing. Additionally, I thought the graph you included was very insightful and your information bounced off of it well. Overall, you did a great job!
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteI really like the relevance of the topic you chose to write about. It was very fresh in all of our minds considering that is what we are talking about in personal finance and due to that, I was able to make a lot of connections, further my knowledge and connect more dots on what all the different terms you mentioned actually mean. Great job!
ReplyDeleteI really liked your blog and I thought it was really informational. The part that was most useful to me was the part about peoples 401(k) accounts. I knew that it was a retirement account but I didn't know how much actully went into it. I thought it was interesting that the money you put into the account will not be taxed until years later when you take it out during retirement and that your tax contributions are not apart of your overall salary thus potentially putting you into a lower tax bracket. I think your post really gets across one of the main points of this class which is to start early and the payoff will be greater.
ReplyDeletei like your blog. i like the 401k part
ReplyDeletethe difference between starting atleast at the age of 25 compared to 35 is crazy and I will now know to start investing in my retirement asap. Thanks!
ReplyDeleteAshley Anderson - Amazing work with this blog post! I totally agree that saving for retirement as young as possible is CRUCIAL for making a living down the road. For example, my grandparents told me that they started saving for retirement around the age of 20! While this may seem very young, they now live an amazing life with a lake front view and are able to relax. This personal example goes to show that while retirement may ages away, saving for it as soon as you can will pay off in the end. I really like how you enforced the "ASAP" part in your blog, because people don't realize how much money you can make in the future by saving for retirement NOW.
ReplyDeleteI loved your blog! At first it seems crazy to start thinking about retirement at such a young age, but your post really showed how important it is to start saving ASAP. Even just seeing the difference between people who start saving at 25 vs 35 really shows how the earlier you start saving for retirement the more money you will have. I really liked how you explained the different methods of saving for retirement. There are so many different methods and it can be confusing to know which one is the best fit for you. I also didn’t know that you can open a custodial Roth IRA, so that people under the age of 18 can start saving. Overall, your article truly showed how important saving for retirement at an early age is. Great job! (Ally Longden)
ReplyDeleteYou had really good information in this blog and had a lot of detail and made it even more interesting again I agree with this people should really start thinking about retirements and such.
ReplyDeleteI did know that starting early helped, but I didn't know that it had this much of an impact with just a few years in between. The graph you used was very helpful.
ReplyDeleteI loved your blog, Katie!! It always feels kind of crazy to me when I think about preparing for retirement now, especially since I haven’t even gone to college or started a career yet! Your post reminded me how important it is to start saving right now, though. Seeing the difference between people who start saving at 25 vs 35 really shows how the earlier you start saving for retirement, the more money you will have, and the more comfortable you will be later on. There are so many different methods and it can be confusing to know which one is the best fit for you, so I thought you did a great job explaining the options. Great job!
ReplyDeleteIt is important to get exposure to this stuff in high school as by senior year, most of us will be 18. Many people don't think to start planning for retirement until it's too late. By exposing us to this information now, we are able to start planning for this, so that we will be better off when we do retire. Your post did a good job outlining why it is so important to start saving early.
ReplyDeleteThis blog was so helpful to read, and I will definitely use the things you mentioned in the future! It's so crazy how early you can set up a retirement account, and how much you will be able to save the earlier you start. I also love that you mentioned how businesses can provide you a 401K but you can also set up an individual account. Well done I really enjoyed reading this Katie!
ReplyDeleteI appreciate you highlighting the importance of saving and starting early! However, I've been recently reading about how it may be beneficial to take money that one was to save and rather invest in a long-term asset such as real estate. What's your take on an approach like so?
ReplyDeleteI think that the fact that retirement is so far away for young people, they often over look saving for it. This article made me realize why it's important to start saving for retirement early, and how there are many different ways to do so. However, I am curious about how a person would save for retirement if they were struggling financially. What adjustments should a person who can't afford to save as much make? What's something that they should give up or change in order to save money?
ReplyDelete