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saving for retirementWith a job search that’s just beginning, and student loans breathing down your neck, saving for retirement may be the last thing on your mind. But the sooner you start to plan for your future the better, because with time on your side, a little money now can make you a whole lot more comfortable down the road.

Here are a few guidelines for saving for retirement if you’re just beginning your career:

1. Start early!

Most financial advisers recommend putting away 10%-15% of your salary every month for retirement, and increasing that percentage as you get older. If you start with your first paycheck at 22, versus later on at 32, those 10 years can really make a big difference. The later you start, the less money you ultimately contribute and the less potential for growth, which could mean a difference of hundreds of thousands of dollars.

2. Enroll in your company’s 401(k).

Many employers offer a 401k retirement account with a matching program. If your company offers this, it’s wise to enroll and invest as much money as you can before you hit the limit, which is typically about 6% of your salary. A 50% match program can make for huge returns, but remember that because it’s not taxed going in, it will be taxed like income when you withdraw at retirement (when you’re hopefully in a higher tax bracket than you are now).

3. You should also fund a Roth IRA.

Withdrawing from a Roth Individual Retirement Account (IRA) is 100% tax-free if it’s been open for more than five years and you’re older than 59-and-a-half, so once you’ve hit your 401(k) limit, invest in an IRA with your extra retirement cash. Keep in mind that the money you put into a Roth IRA will be post-tax dollars. Essentially, you’re paying taxes on that money now instead of when you withdraw it.

4. Don’t withdraw early!

If you take your money out before age 59-and-a-half, you’ll face a 10% penalty, which can really decimate your earnings. This applies even if you leave the company with which you opened your 401(k), though many offer options to roll your funds into a new account. Since penalty withdrawal ages are a bit more complex than just ensuring you’re older than 59-and-a-half, be sure to consult a financial adviser before you begin withdrawing. You should also maintain a healthy emergency fund and savings account so you’re not tempted or forced to withdraw early in case of an emergency.

5. Take investing risks.

When you’re young, many experts recommend that you make more high-risk, high-reward investments, because you have the luxury of time on your side. Assess your own willingness to invest in volatile stocks, or diversify your portfolio accordingly for more security.

6. Don’t count on an early retirement.

Unlike your parents’ generation, it’s unlikely that you’ll be able to retire at 65 or younger, and don’t count on a pension or Social Security to help fund your golden years. If you are able to cash in on either of those benefits, view it as an added safety net, but with current laws and trends, it’s unlikely that you’ll see as much of a payout as your predecessors. Saving for retirement is becoming your responsibility more and more every day, so start taking care of your future now.

Image: Monkey Business

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