Until you are close to retirement, you probably don’t give it much thought. I remember starting my first job and my coach/trainer was older and always talking about retiring. As a teenager, I didn’t give much thought to it, thinking “That’s 40 years away!” A lot can change in 40 years so I assumed that what I was being told now wouldn’t really apply to me when it came time for me to retire. I couldn’t have been more wrong. In fact, a lot of what I was told to think about and do would have helped me out a lot when it does come time for retirement. I could’ve been ahead of everyone else my age if I would’ve only listened.
So my first advice for saving up money to retire early is to start saving early! As soon as you apply for a job, one of your questions in the interview should be what the retirement options are. Can you start contributing to the retirement fund or 401k as soon as you start, or is there a waiting period? Does the company match your contributions? How much can you contribute?
Even though you won’t get to see and spend money you put into retirement to buy yourself a new home theatre system, you are actually doing a much better thing by putting away that part of your income into retirement.
If your job offers to match your contributions that means your retirement account will gain even more, even faster. It’s like getting free money for retirement.
My second tip would to be to contribute as much as they will allow you out of each check. You’ll gain more money by putting more into it. It also forces your employer to put in the max they can if they contribute as well. Putting in more now will help ensure you have enough to retire later when it’s time. I have heard several people that are old enough to retire say that they can’t retire because they don’t have enough money saved up or put into their retirement plan. You can avoid being in that situation if you contribute as much as possible each month.
My third tip to saving for retirement would be to not put all your eggs in one basket. Put as much money as you can into your company’s retirement fund, but also put money into another account such as an IRA or stock account. I know the economy is poor right now and people are afraid of loosing money, but the economy will turn around.
If you’re young consider putting your money into medium to high risk accounts. While you might not do very well right now, once the economy starts picking up you will most likely do really well at that time. However, there are also low risk accounts you can put your money into if you wish. As you get closer to retirement a low risk account may be better for you so you don’t loose any of the money you’re trying to save. Low risk accounts will not gain as fast or as much as the medium and high risk accounts, but they also won’t lose as much or as fast.
My fourth tip would to be to never touch the money you put away for retirement. Don’t take it out to help you get out of debt, put a down payment on a house, or anything else. Consider that money untouchable until you can retire. Some accounts won’t let you take it out unless you lose your job (quit, get laid off or fired) and some accounts will let you take it out but cost you steep fees.
My fifth tip, which is an important one, is to make sure you roll your money over if you do ever lose your job. See if you can roll the money over into your new retirement fund with your new job, or roll it into an IRA or something similar to that.
Often times, if you switch jobs but they have the same retirement program/company you can just keep your account and continue to contribute to it.
For more information on retirement check out http://www.ssa.gov/planners/faqs.htm.