One advantage of being young is that you have time on your side so you can recover from any short-term downturns in the stock market. Start saving now and your future millionaire self will thank you.
If the person waits until age 35, the amount will be a little more than $535,000. For example, a 25-year-old earning $40,000 a year, contributing 10% in salary, receiving a 6% employer match, and earning a 6% average annualized rate of return will have more than $1 million by age 65. Retirement may seem like a long way off, but the sooner you save for retirement, the longer your money can grow and compound. Many retirement plans even have a feature that will do this for you automatically. If you can’t afford to save much now, you can gradually increase your contribution rate each year.
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If your new employer offers a retirement plan with a match, try to contribute at least enough to get that full match. (See #6 below.) 5) Take Advantage Of Your Employer’s Retirement Plan Once you build up enough cash outside the Roth IRA, you can invest it more aggressively for retirement. Just be sure to keep your Roth IRA funds somewhere safe like a savings account or a money market fund if it’s part of your emergency fund. You can open a Roth IRA at practically any financial institution. If you withdraw any earnings before then, you may have to pay taxes and a 10% penalty on that money, but your contributions always come out first.
(The limit was only $2,000 a year back then but you can contribute up to $6,500 for this year.) You can take out whatever you put in without tax or penalty and anything you don’t take out can grow to eventually be tax-free after five years and age 59 1/2. One of the first places I put that cash was a Roth IRA. The easiest way to do this is to set up an automatic transfer of money from your checking account to a separate savings account each month. Having some cash in the bank (ideally enough to cover 3-6 months of necessary expenses) gave me some peace of mind and the freedom to leave a job or living situation if needed. However, it can cost a lot of money to leave a job or move to a new location. Your early years will likely involve a lot of changes between jobs and places to live as you try different things out.
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