You may think that there’s no such age that is too young to begin planning for your golden years. This is partially true.
You will always benefit from saving for your retirement at an early age. Even if you’re in your early 20s and have just officially entered the workforce, it never hurts to put away a small amount of each paycheck with retirement in mind. Or even better, you could start investing in your 20s. This age is also ideal for taking advantage of high-risk, high-return stocks because your 30s, 40s, and 50s will act as a buffer for any lost income.
However, being a proactive saver is very different from planning your retirement. When should you officially begin planning your retirement? Most financial experts will tell you that your thirties are a good time to start. You’ll most likely spend your twenties getting an education, pursuing a career and maybe even starting a family. By the time you reach your mid-30s, you’ll have many of life’s bigger questions sorted out so that you can at least begin to know how much money you’ll need to retire and which other financial obligations of the present will compete with your desire to save part of your paycheck for it. Factoring in your student debt (if you still have any), a car note and how much you plan to save for your own children’s education is critical in this process.
But your largest financial obligation–and therefore the biggest competitor for money that could be going into retirement savings–will be your home. This should play no small part in your retirement planning because owning your home outright one day could provide you with the financial security that you need when you are no longer working. You can use a mortgage calculator to help you determine at what rate you should pay off your home loan while also saving for retirement.
Also, by the time you reach your 30s, you should definitely have a 401(k) if your employer offers one, or at least an Individual Retirement Account. These savings not only offer the benefit of being tax-exempt but they may also curb your temptation to dip into them for non-retirement purposes because you face a heavy fine for withdrawing the money.
As you enter your 40s, you’ll want to make more firm plans for your financial future, which will include a more tangible savings goal for retirement. You may also want to begin to shift some of your investments from stocks to lower risk bonds, though not all of them have to go this way.
Of course, there’s no magical age at which your retirement planning instinct should kick in. It will vary slightly depending on your financial situation. But even if you aren’t making solid plans, you’re never too young to keep an eye toward the future.