When I graduated from college, I had several goals. Paying off my education loans, building an emergency fund, and saving money for travel (something I didn't do much of as a cash-strapped student). Thankfully, a combination of getting a good job straight out of college and living at home for a period of time (and thus not having to pay rent) helped me achieve these goals.
But there was one financial goal I overlooked in my early 20s. It was funding a retirement account. And it ended up costing me a lot of money. I just didn't realize it at the time.
A mistake I want to correct
I started funding my retirement plan on an ongoing basis around age 25. But you could have started funding your retirement plan three years earlier.
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When I started working, I didn't have access to a 401(k) plan through my job. But an IRA has always been an option. It was just an option I decided not to take. And to be fair, I got access to my 401(k) shortly after that.
My logic was that since retirement is still far away, I have plenty of time to save for retirement throughout my career. Additionally, I wanted to reduce my debt and put money in the bank.
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To be fair, my decision to focus on building an emergency fund wasn't a foolish one. According to SecureSave data, 63% of Americans today can't afford their $500 unplanned expense. I didn't want to be in that position, so I prioritized short-term savings over long-term savings, which made sense.
But what I should have done is at least Several Put money into your retirement account. Losing three years of contributions means I'm much less ready for retirement than I ever imagined.
What you missed
You might be thinking, “What's the big deal? I waited years to put money into my retirement account. How much money could I have really missed out on?” I don't know. But the answer is, quite a lot.
Investing your retirement savings in stocks can turn a little money into a lot more money. The stock market's average annual return over the past 50 years has been 10%.
So let's say I contributed $5,000 to a retirement plan 20 years ago. With the same return, that $5,000 would be worth her nearly $34,000. So, from my perspective, failure to take action in this regard could potentially cost him $29,000 in damages. That's a lot of money.
Of course, I got back on track pretty early on and was able to start preparing for retirement in my mid-20s. I've been contributing to that work pretty consistently ever since. Still, if I could go back in time somehow, I would tell myself to start saving for retirement right away. And you might want to tell yourself the same thing. It may seem unnecessary if you're young and retirement is far in the future, but it's a smart move to make for your personal finances.
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