As many of you know, my husband and I have a TON of student loans to pay off. Unfortunately, we’re not even finished accruing them yet (he’s in medical school with three semesters left.) However, even though we’ve got a long way to go with paying off debt and building wealth, we haven’t ignored our retirement savings.
While many people our age have more money saved than we do, we at least have a head start that many of our medical school friends do not. My husband was employed for three years before being accepted to medical school and utilized his company’s match while contributing 6% of his income to his 401k. While he was in medical school, I started a Roth IRA of my own and have maxed it out each year.
It hasn’t been easy but we’re evidence of two people who don’t worry about retirement because we know what we have to do to get there. The key, we believe, is to start saving as early and as often as you can.
Utilize Your Match
My father in law is a huge advocate for retirement savings. He retired at 55 and my mother in law retired at 59. They drilled into my husband’s head as a teenager that he should be saving for retirement starting with his very first paycheck. His parents took the time to explain how retirement savings accounts work and how an employer match (for those of you lucky enough to have one) also works in your favor. They also told him about the benefits of compound interest and the huge tax drawbacks of having to take funds out early. These are all things I came to learn from my husband too, and I’m amazed when I hear stories of people who only give 1% of their income to their retirement accounts or people who liquidate their 401ks to go on vacation.
Make it Automatic
In order to make retirement savings easy, take the time to set up an automatic withdrawal before you even start your first professional job. This way, when you see what your first paycheck looks like, you won’t have a chance to make excuses for why you shouldn’t “give up” some of that money for retirement savings with your next check. Believe me, if you don’t set up automatic savings you’ll find other ways to use that money instead.
If you can afford it, you should try and save at least the minimum required to get your employer’s full match. This is free money and an automatic way to double your money (assuming your employer’s match is 100%.) There’s no better return on investment out there!
If you truly can’t afford to set that much aside from every paycheck, determine the amount you are able to save and set up a deduction for that amount instead.
It’s All About Compound Interest
Starting your retirement contributions as early as possible means you have more time for compound interest to work in your favor.
No matter what age you are right now, get started saving for retirement today and let compound interest work for you as long as possible.
Have you started saving for retirement yet?