When you are young, retirement seems like a distant prospect, which you do not need to worry about. However, before you know, time will fly and you will be close to your retirement age. Instead of being sorry later, it is better you start investing when you still have ample time to build your retirement savings without unnecessary pressure. If you start early, you get more time to earn higher returns on your investment.
How much to invest
The first step to building a retirement fund is to understand how much money you need to save. You can try online calculators that will give you an approximate idea of the amount of savings you need to make based on your age, income and any existing retirement funds. You will get to know what percentage of your income you need to save.
Don’t go below the minimum savings target. If you are unable to save that much in a year, then compensate for it in the next year by saving more. Never forget that discipline is one of the most important success factors when it comes to investing
Try to save more than the minimum percentage as it will compensate for any unforeseen circumstances later. It is better to play safe as many factors such as recession and loss of job can completely derail your savings plan.
Where to invest
You should start building your retirement savings by signing up for the 401(k) plan offered by your employer. Any contribution to 401(k) is typically matched by the employer and you will also get the benefit of tax deferral. A 401(k) is an account in which different kinds of investments can be made. You can create your own portfolio from the investment options available in your plan.
Alternatively, you can go for a managed account or target-date fund if it is available in your plan. There would be limits to employer contribution and you should try to put enough savings in your account for getting the full contribution.
Track the progress of your portfolio either on your own or by using various calculators and tools that are available with 401(k) plans. A 401(k) is just the first step towards building your retirement fund and you have a long way to go from there. You can build an IRA, get an insurance that will give you fixed annuity and look for other investment opportunities as well.
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