How and When to Start Saving For Retirement

Sometimes it is best to focus on meeting your current financial needs first.


Despite the fact that it's better to start saving for retirement at a young age, most people don't begin to think about their retirement needs until much later in life. To stress the importance of retirement saving, many financial experts recommend you begin saving for retirement right now, no matter what. But the reality lies somewhere in between. If you are foregoing basic necessities now for the sake of the future, then now is not the time to start saving for retirement.

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When to start saving for retirement. The best time to start setting aside money for retirement is when you are financially stable. It won't do you any good to start your retirement savings if you are consistently late on bills or if you are struggling to get by. If you meet the following criteria, then you should be financially stable enough to start saving for retirement:

  • You have an established emergency fund to help cover any financial emergencies.
  • You can meet all of your short-term necessities, including food, shelter, utilities, and other monthly bills.
  • You can meet all of your medium-term goals, such as paying off debt, savings goals, and thinking about the future financial needs of you and your family.
  • If you can't consistently meet these obligations, then it's probably best to forgo saving for retirement and focus on meeting your current financial needs. If you can meet these financial goals on a regular basis and still have money in your budget, then you should begin investing for retirement.

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    How to save for retirement. There are many options for retirement savings. Most financial advisers recommend retirement accounts that offer tax benefits, including 401(k)s, 403(b)s, the Thrift Savings Plan, and IRAs.

    Employer-sponsored retirement plans. If your employer offers a 401(k) plan, you can get started with automatic contributions directly from your paycheck. This puts your retirement savings on auto-pilot, and is the most effective way to begin saving for retirement. If your employer matches a percentage of your contributions, then try to contribute at least enough to take advantage of the company match. Don't leave free money on the table. If your employer doesn't offer a retirement plan or you already contribute up to the employer match, then consider one of the other retirement plans available, such as a Roth IRA.

    Roth IRA. Opening a Roth IRA is a good choice if your employer doesn't offer a 401(k) or if you want to invest above and beyond an employer sponsored plan. You can have both an IRA and a 401(k). Roth IRAs offer great tax benefits. You contribute money after you pay taxes, the contributions grow tax-free, and you can make tax-free withdrawals in retirement.

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    Opening a retirement account is not complicated. Employer-sponsored retirement plans are often started automatically when you begin a new job, or can be started by contacting your human resources team or 401(k) plan administrator. It usually only requires a form or two and determining the amount of your contribution. Opening a Roth IRA only takes a few minutes and can be done at virtually any bank, credit union, brokerage, or with a financial planner. As with a 401(k), it is a good idea to set up automatic contributions so you can automate the investing process.

    Ryan Guina is a U.S. military veteran, writer, and professional in the corporate world. He blogs at Cash Money Life and The Military Wallet.