How To Create a Retirement Planning Checklist in Your 20s and 30s
As someone who specializes in business and wealth management for professional athletes, I’m pretty fluent with the 20-30 year-old age range. As athletes, they often have larger finances to manage, which is great from a resources standpoint, but can open things up for over-complication, one of the bigger enemies to successful retirement planning.
In today’s post, I’m bringing you a slightly different perspective than you’re probably accustomed to seeing. It’s from Todd Tressider over at FinancialMentor.com, and although I’m focusing on the 20-30 age range in Todd’s retirement planning guidelines, if you find his take on this subject interesting, then I certainly encourage you to follow the link at the end of this post and read more. I definitely appreciate his insight, and I think it can help build a little confidence in anyone trying to successfully plan their retirement.
That said, I’m a big proponent of understanding the big picture and learning different perspectives, and I think Todd’s take on your 20s and 30s is certainly a much better track to take than doing nothing until your 40! Here’s the part I want to share, and please feel free to share your comments with me below.
Retirement Planning Checklist in Your 20s: Save Money & Build Assets
You’re out of school and you’ve begun working at your first job. You’re finally on the path to independence after relying on your parents or other adults all your life. The future is in your hands, and so is your financial security.
Let’s face it: at age 25, your priorities don’t include reading books on retirement planning. Yet, if you don’t begin the process of saving for retirement now it will only get harder with each passing year.
You stand at a crossroads. You can choose between good money habits or financial ignorance.
You can take the easy and secure path to financial security by saving from each paycheck… or you can follow the more common path of consumerism and financial mediocrity by putting it off until later.
Which path you choose will largely determine your financial outcome in life.
Admittedly, saving for retirement is easier said than done for most in their twenties because old age seems impossibly far away. Why save for it now?
The Importance of Starting Now
There’s plenty of time so it’s not a priority. Right?
Not really. Every 60 year old that started building their assets later in life wishes they started earlier.
The math is simple, compelling and undeniable. And that’s good news: there is no need to get complicated at this stage.
You don’t have to read investment books, get a masters degree in finance, or build some fancy plan because that would only cause you to put off doing what is important at this stage.
Trying to immerse yourself in complicated materials doesn’t do anything to help you. Instead, it serves as a great excuse to not get started because you feel overwhelmed.
But that’s the only thing to do right now: just get started.
“Sometimes the questions are complicated and the answers are simple.” – Dr. Seuss
How to Begin
One simple action is sufficient. Here’s what you can try to just get started today:
- Max out your government sponsored, tax-deferred retirement plans. Your employee benefits department, accountant or any mutual fund company can show you how.
- If your company offers a 401(k) or similar plan, contribute the maximum.
- Fund either a traditional IRA or Roth IRA to the maximum amount allowed by law. (Self-employed? Try the SEP IRA.)
Put as much money into tax deferred savings as you can. Few things are black-and-white clear in financial planning. If you’re in your 20s or 30s, you’re in luck: you just found one of them. Just do it and get started.
Want Retirement Planning Extra Credit?
For those that are savvy wealth builders, an additional smart strategy at this stage in life is to buy real estate with a fully amortizing, fixed-rate mortgage that can produce income and provide positive cash flow.
Notice the details of that last sentence: positive cash flow, fully amortizing fixed-rate mortgage. These are important details. Don’t gloss over them.
Rather than rent an apartment, buy a starter home or a small apartment building that you can live in now and use as a rental unit later. The fully amortizing loan will be paid off by the time you are ready to retire and you will have inflation-adjusted income you can never outlive.
This is also a very good strategy for people who choose lower paying careers thus making it harder to save large amounts of money in retirement plans. Skilled deal-makers, handymen, and construction workers with specialized talents can also benefit from this investment approach.
These two strategies may sound aggressive, but anyone in their 20s or 30s today must own up to the idea that the Baby Boomers will either bankrupt Social Security or change it beyond recognition.
You can’t depend on Uncle Sam to pay for your retirement. If you are going to retire in style, then it is up to you to make it happen. You’re on your own. Sorry, but that’s reality.
To sum up, here’s all you need to worry about right now:
- Max out your tax deferred retirement plan contributions. This is the no-brainer first step that everyone should do. It requires no education or financial experience so you can start immediately. It’s as simple and direct as anything gets in the financial world.
- Acquire positive cash flow rental property: This strategy is for more aggressive wealth builders with the skills and inclination to go one step beyond the basics. It’s not necessary and isn’t for everyone, but it has the unique advantage of providing inflation-adjusted income during retirement that you can never outlive.
- Oh yeah, and don’t forget to have fun! You’re only young once.
Don’t worry about creating a highly-detailed plan at this stage of life. Complicating your situation will only serve as an excuse for procrastination.
To read more, click here for the full article over at FinancialMentor.com
Credits: Retirement Planning Checklist – FinancialMentor.Com
