If you're like most 20-somethings these days, your golden years are probably the very last thing you're worried about. How could you, when there are new outfits to buy and smartphones to upgrade? It's true that you're only young once, and that's the perfect time to start saving for retirement. It'll actually be easier this way; if you start saving while you're in your 20s, you can take advantage of compound interest and actually save fewer dollars, but end up with more savings in the long run.
Here are four things you should do to prepare for your golden years now.
Don't Let Go of the Starving Student Mindset
As a recent college graduate, it's probably safe to say that you're already accustomed to living on a very limited budget. It will take a considerable amount of will power, but continue living that lifestyle as long as you possibly can. This way you can continue on with the same budget, even as your income increases while you build your career, and take that extra money to save it for your retirement. Ultimately you'll end up spending more as your family grows and your needs change, but keep that frugality you've become accustomed to top of mind.
But as long as you're single, continue budgeting with that starving student mindset. You'll be glad you did later when you see how much that money multiplies as the years pass. Your pocketbook will thank you, and your family will too.
The driving force behind saving for your golden years is, well, to make it to your golden years. So take care of yourself. Get regular checkups, be aware of your family's history of illness and know the signs if you're at risk for any life-threatening conditions. Catching early signs of cancer and other deadly disease early often makes all the difference. Keep that in mind and don't take your good health for granted while you're young.
And stay active. Stay as active as you can, every way you can, for as long as you possibly can. The American Association of Retired Persons (AARP) reports that, "people who exercise, on average, live longer than those who don't..." through reduced risk of heart disease and stroke, high blood pressure, colon and breast cancers, depression, and countless other detrimental conditions. Something as simple as a 30-minute walk each day could significantly reduce your risk for many scary health conditions.
Determine How Much You'll Need in Retirement
In order to achieve a goal you have to set a goal. Determining now roughly how much money you'll need in retirement is the best way to begin making it happen. Make those hard and fast decisions early on by living within your means and keeping that end goal in mind as you roll through life.
In order to determine how much you'll need, you'll want to decide roughly when you'd like to retire, and how long your retirement will need to sustain you (how long you'll live). Be sure to factor in inflation rates and any family members you'll need to support. It's now that you'll want to start looking into the pros of annuities versus other investment options for your portfolio. Make those decisions now, so you can reap the benefits down the road
Start Saving Now
This can't be stressed enough. Start saving now. Right now. Pronto. Immediately.
The reason it's so important for you to start saving now is because the earlier you start saving, the longer the funds have to multiply. Through the power of compound interest, money that sits in savings for forty years is more valuable than money that sits there for only 10 years. Take full advantage of that by starting now.
Take this scenario for example. If you save a mere $100 per month starting when you're 20, given there's a 5 percent interest rate that's compounded on a quarterly basis, you'll have $152,410 when you're 60. If you save that same amount from age 30, you'll only have $83,525. That's a difference of nearly $70,000 of free money, just because you started earlier.
You're only young once. Go, enjoy your youth. Enjoy the freedom to follow whatever career path you choose and to fall in love (or not), and to live every aspect of life to the fullest. Just don't neglect your own future. You're the only one who will lose if you opt out of planning for your retirement while you're young. These are the quintessential pieces of advice for you to help you prepare for your golden years: live frugally, take care of yourself, set goals, and start early.
Jane Miller is a freelance writer who loves to write about anything from tech to mommy stuff. She is featured in many blogs as a guest writer, and can write with authority on any niche or subject.