Yes, it can be a struggle just to picture your life 10 years from now, let alone 50. Yet the future will arrive - whether we’re ready for it or not! Rather than be overwhelmed by a seemingly daunting task, take easy, actionable steps to make your goals happen. Yeah, the fear of being on top of your bills in the present can make you freeze up when trying to invest in the future. But you don’t need to set aside 15%, 20%, 25% of your paycheck! Start saving for retirement now: even if you start small, you’re at least starting somewhere, and that’s what counts most in the long run.
How do you start a 401k? When you’re looking for or starting a new job, this is an important part of your benefits to review. A 401k is a retirement plan that your company sponsors for you. It will allow you to set aside money from your paycheck that will get invested for you. If the thought of stocks and bonds makes you feel like you’re swimming in shark-infested waters, remember that you have a lifeboat. You have control over how aggressive you want to be in your investments. The younger you are, the more risk you can afford. As you get older, you want to dial back your risky business to be more conservative because you won’t have as much time to recover from an economic tsunami, should one come crashing down. Many employers will also match your contributions, or at least put in a percentage of what you do, and you should always take advantage of that option. When you retire, this will be the money that supports you so that you don’t have to keep a job far into your old age.
It’s hard to think about the future when you’re thinking about paying for college, rent, a car, and other bills that need to be taken care of right now. The thing is, the sooner you start investing for retirement, the less you have to do. Even if you only put in, say, $50 per paycheck now, if you do it regularly it will add up over time - especially with the return on the 401k investments. Otherwise, you will find yourself scrambling later in life to save for your retirement, and might have to invest something more like $500 per paycheck to attempt to have enough to live the same quality of life you’re used to.
Even if you’re ready to move on in a few years, you can take your 401k with you to your new company, by rolling over the account into a new one. Learn more on the specifics of your investment options with Investopedia. If you’re still worried about your short-term situation more than the long-term, consider this: contributions from your paycheck into the investment plan will lower your taxable income. If you were to make $50,000 and set aside $10,000 in your 401k plan, you would only be taxed on $40,000 that year. Only when you’ve retired and are cruising along into the next phase of your life will you start being taxed on the money you withdraw.
Think of the possibilities if you start now and let that interest on your investments build up. You could be on a beach, catching the last rays of sun as you watch it sink below the horizon. Maybe you’re on a farm you bought with a few friends, taking care of your vegetable garden together. You might be enjoying a tall glass of lemonade in the spacious house you raised your kids in, now keeping an eye on your grandkids as they play with your dogs. Whatever your dreams are, you can reach them - you just need some planning and a 401k.
Take control of your future today and invest in yourself with a 401k. You can also get started with an IRA from SunWest Credit Union, which provides an extra boost to your retirement planning.
February 19, 2021
Published by SunWest Credit Union
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