Money For Lunch – 7 Ways to Set Yourself Up For Retirement in Your 20s

7 Ways to Set Yourself Up For Retirement in Your 20s

March 20, 2017 11:21 AM0 commentsViews: 23

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Retiring with more years of your life left to travel, sleep, and pretty much do whatever you want to do is the dream of many people. Unfortunately, few reach the financial security they seek at a young age, specifically in their 20s. In an age when a person has limited work experience and professional credentials to land a high-paying job and when priorities are mostly leaning towards going out and having fun with colleagues, it can be difficult if not impossible to retire before you reach 30. To help you accomplish such feat, here are seven ways to do it.

Calculate Living Expenses      

How much do you need to live off of every month? The numbers will fluctuate depending on where you plan on retiring, what lifestyle you are planning to adopt, if you have any dependents and if so, how many they are, and so forth. Health insurance must also be accounted for since retiring in your 20s leaves you far from the average human life expectancy, which according to USA Today is at 78.8 years. Having adequate health insurance safeguards you from costly medical bills that may arise in the future, and if not covered, may impact your finances drastically.

Get Professional Help

Working with a sydney based financial adviser is infinitely a much better decision than trying to figure it out all by yourself. It can be frustrating to sit down and look at your finances from all possible angles, even more so to consider all variables at play. A financial planner or adviser covers the fundamentals and can scope in to take a closer look at what needs to happen for you to reach your financial goals. They can give you concrete steps to take and steer you to the right financial direction. While their services cost money, the expertise a financial adviser brings to the table is invaluable.

Effectively Leverage the Power of Compounding

Referred to by Albert Einstein as the “greatest mathematical discovery of all time, compounding is an essential technique that can be applied to all aspects of life. If implemented carefully, compounding transforms your idle cash into an income-generating machine. In a nutshell, compounding involves reinvesting the income that investment portfolio generates. What’s great about compound interest is that you only really need two things – consistent reinvesting of asset earnings and time. If you start out in your early 20s, the initial asset earnings have more time to grow exponentially.

Get Experience

As a teenager or young adult, social pressure can lead you towards the traditional college career path that takes anywhere between four to six years or more if you decide to specialize. By the time you finish, you’d have spent half of your 20s in school, not to mention the thousands of dollars in tuition debt that you’ve accrued over that period of time. Whilst it’s not to discredit the importance of getting higher education, getting real-world experience as a young professional can give you access to higher-paying work.

Take Advantage of a 401(K)

If you’re looking for work or is currently working for an employer who offers a 401(K) plan, don’t pass up on the opportunity. If your employer offers a 401(K) that matches $0.50 cents for every $1 you contribute, that can lead to a 50 percent ROI over time. If, however, you don’t have a 401(K)-sponsored plan, you can open an IRA account to get the same or at least similar advantages of tax deferral. While the contribution limits are relatively lower to a 401(K), racking up to $5,000 annually in an IRA account makes you eligible for a tax deduction.

Open an ITA

An individual trading account bears a greater deal of risk than most investments you can dive into, but it also offers an attractive ROI. Patience, a technical strategy, and good risk management practices can coalesce into consistent profits. Trading currencies, precious metals, commodities, and other assets either full-time or part-time can provide additional source of income.

Avoid Time Wastage

Time is perhaps the most important resource anyone is given. Retiring at a young age requires you to sacrifice late night movies, dinner dates out of town, shopping with friends every day after school or work, and other activities that do not increase your net worth. Divide your time wisely, using every minute of your day on studying about the industry you are looking to jump into and mastering the skill set to compete in that said industry.

Retiring at a young age sounds impossible. Fortunately, it doesn’t take a genius-level intellect or family riches to be able to retire from work and get the freedom to do the things you want. Use the seven steps above to speed up saving, build multiple income sources, and generate a sufficient net worth that will financially support you over the course of the next years.


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