HOW TO SAVE FOR RETIREMENT IN YOUR EARLY YEARS

For those that are younger, say the so-called �millennials� aged 18-34, saving for retirement can very well be way down on the list of priorities for those just in the workforce. Yet saving for retirement in the early years not only develops good savings habits but leverages the effect of compound interest. For those that have never saved and mostly spent, saving for retirement might be a bit difficult to adjust to. Either way, saving now will have greater benefits later down the road.

Let�s take a look at someone who invests $3,000 per year, or $250 per month, for 10 years. At the age of 65, that $30,000 investment turns into $250,000 assuming a 5.0% return. That�s just for 10 years. As interest is returned to the original principal each year, interest is applied to the larger balance. That�s compounded interest. But let�s look at how to actually save, even for those not used to the practice.

If your employer offers a 401(k) plan, jump on it. You decide how much you want to have taken out of your paycheck, tax-free, and deposited into a savings account, up to $18,000 per year. These are funds you�ll never really �see� because they�re taken out of your gross monthly income and not deposited into your bank account. Further, if your employer matches your contribution, you get double the effect.

Another easy way to start saving is to start small. Begin by having just 1.0% of your gross monthly income transferred into a savings account. After a few months when you get accustomed to the slightly lower take-home pay, increase the amount to 2.0%. Then 3.0%. This way when you gradually adjust your savings patterns in such small increments, it becomes a habit, not an expense. By gradually increasing your own contributions, you�ll soon be able to become a consistent �saver� and eventually secure your retirement.

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