If you think that an article about retirement doesn’t apply to you, you’re wrong. Even though you’re only in your 20’s and retirement seems like it’s a long way off, you need to start saving now so it’s a lot easier in later life. But most millennials don’t know that much about saving for retirement because nobody teaches us about it at school and most of us don’t realize that we need to start saving. A lot of us also think that we can’t afford it because we’re on low wages and already struggling to make ends meet as it is. How are you supposed to save for a deposit on a house, put money aside for retirement and actually enjoy yourself from time to time? Hopefully, you can answer some of those questions if you read this millennials guide to retirement savings.
Every Little Helps
This is the most important concept to be aware of when you’re trying to save for retirement. A lot of people just don’t know how much they should be paying in. That usually means when people are on a low income and they’ve got a massive rent to pay, they don’t think that there’s any point because they can only afford to put a bit in each month. But what people don’t realize is that you’re getting compound interest on your money.
If you don’t know what compound interest is, check out this quick video that explains it well. Basically, it’s the interest that you get on your interest. It creates a snowball effect over the years so even if it doesn’t seem like much now, in 50 years when you come to retire, that money will have grown a lot. You’ve also got to remember that your employer matches some of the contributions as well. So, get started as soon as possible and don’t worry if you’re only making small contributions at the moment.
Move Money Around
Another big misconception that people have is that you decide on a retirement fund and then pay into for the next 50 years and that’s it. But in reality, there are a lot of different pension options and sometimes, it’s best to move your money around. That’s why it’s good to have a pension review done every once in a while. They’ll be able to tell you whether your current strategy is the best one for you right now or whether you should move your money around a bit.
Have Separate Savings
Saving for retirement is important but it’s not the only thing that you need to put money aside for. Having an emergency fund that you can use to pay for things like car repairs or to cover living expenses if you lose your job is important too. You also need to put money aside for a deposit on a house as well so make sure that you’re not just putting everything into your retirement fund and neglecting your other savings.
These are the 3 things that all millennials need to know about their retirement fund.