Brian Kelly, Resident Financial Planner
Good question and something members of Generation Y should be thinking about.
Baby-boomers enjoy a couple benefits that younger people will likely have either reduced or not available at all. Social Security will likely have to be reduced in some way, and pensions are becoming extinct. Young people simply need to save more than their parents did for these reasons.
Start as early as possible for a couple reasons. One, you will have more time to compound your interest. And two, when (not if) an obstacle comes up (new home, baby, job loss, etc.) and you need to cut back your savings temporarily, you will be able to get through it with little effect to your retirement goals.
Save as much as you can afford. Start by at least taking advantage of your company’s matching contribution and increase annually when you get a raise (some companies have an automatic rate escalator which makes it easier). Shoot for 20% of your salary between your contributions and your employer’s matching funds.
Don’t forget about other goals along the way. Automatically save in a dedicated account for emergencies, vacations and major purchases. After all, retirement is far off and you want to enjoy your life on the way too.
You can learn more about retirement savings in our new book What Your Financial Advisor Isn’t Telling You.
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