How to Prepare for Retirement in Your 20s

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It’s important to prepare for retirement, whether it’s right around the corner or decades away. Decide what you plan to do in retirement and therefore how much money you’ll need in your retirement fund. What’s your H.E.A number? Do you have lofty goals of traveling, pursuing hobbies, and living in a grand home? Or do you plan to have a modest retirement, possibly downsizing to a smaller home and continuing to work into your retirement years?

Once you know what your goals are, prioritize how you will save to fund those goals, and how you will spend the savings when the time comes. Remember, retirement can last 20-30 years, so it’s important to be prepared financially.

Below are some recommendations for preparing for retirement in your 20s. Be sure to read our related posts on preparing for retirement at every age.


How to prepare for retirement in your 20s


Save money aside.

A little goes a long way because time is on your side. Aim to save the equivalent of one year of your salary by the end of your 20s for retirement.


Build an emergency fund.

Build an emergency fund separate from your retirement fund. This ensures you won’t have to dip into your retirement savings, which would sacrifice valuable gains.


Allocate investments for the long term.

Avoid trying to time the market. At this age, time, not timing, will allow your money to grow the most.


Get insurance.

Insurance protects against financial disaster so you don’t have to deplete retirement savings to cover high-cost emergencies. Consider insurance for everything that might be a risk to you such as health insurance, auto insurance, renters insurance, disability insurance, and more. When it comes to things like life insurance and long-term care insurance, it’s easier to get it while you’re young and healthy.


Top Tip:

No matter your age, the most important thing you can do to be financially prepared for retirement is save money. The earlier you start, the better, but it’s never too late. Starting today is better than starting tomorrow.

Sources: Department of Labor, Ameriprise, CNBC, Bank of America, Investopedia, IRS, Fidelity


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