Thursday, October 23, 2008

Young Women and Savings: Save Early, Finish Strong

As a young woman, it's easy not to save for retirement. Student loan payments, rent, and that pesky college credit card debt all have to be paid off monthly, while retirement seems like something that is light years away. "Sure," you think, "I'll save for it, once the loans are paid off, next month's rent is taken care of, oh and after that vacation next summer..."

There will always be other expenses that seem more urgent than saving for retirement. In the next few years, you may finish paying off those loans, but replace them with graduate school tuition or a mortgage, and it will still feel easier to put off saving for another time. When it comes to retirement savings, the earlier you start, the more impact your savings will have on your future retirement security. If you put aside $500.00 a year from age 22-30 you'll save $4,500 dollars. Okay, so that doesn't seem like enough to retire on--but wait! If you put that money in a tax-deferred retirement plan at an average rate of return of 6%, you'll come out with $63, 918 dollars.

The point is, you don't have to save a ton at this point in your life, but it is important to make sure that you're saving. Here are a few tips for young workers to get you started from the National Save for Retirement week website:

  • Start now: Most people join the workforce soon after they graduate from high school or college, but research shows that many neglect to save for retirement. According to a survey conducted by the Employee Benefit Research Institute, 41 percent of workers between the ages of 45 and 54, have less than $25,000 in total savings and investments.Thirty-nine percent of workers aged 55 and older also total savings of less than $25,000.
  • It all adds up. Skip one trip to the corner deli each week or forgo that $5 bucket of popcorn at the movies. It’s a simple way to free up a little extra money every week. Even $5 to $10 a week makes a big difference, if you start now. Starting early could give you 20-30 years of opportunity for investment earning, which can really add up over time.
  • Pay yourself first. Be sure to take advantage of your employer-sponsored retirement plans. One advantage of saving through your employer-sponsored retirement plan, is that the money goes to savings before you have a chance to spend it. An added benefit is that you are saving pre-tax, which means you get the full dollar benefit of the money you save and reduce your taxable income at the same time.
Need help creating a budget? Download WISER's Budget Worksheet to help you budget your money. You may also want to consider having a percentage of your paycheck put directly into a savings account or retirement plan. For more savings tips, read WISER Women: Keep Track of Your Spending.

1 comment:

retiredebtfree01 said...

What we sow we reap - This proverb fits well with your advice. Enlightening article for the young women. The few tips for young workers to get started from the National Save for Retirement week website was very useful. I have taken a printout too. Thanks for this article.

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