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Four Stages of Saving For Retirement

Step one might not be what you think!

Ask anybody who is just starting to save for retirement what their strategy is, and you’ll probably hear something simple such as, I’m putting 10 percent into my 401(k) and shopping less. This “Google search” approach to retirement isn’t hard to follow – provided you have discipline with your money. But if you take a hard look at the lifestyles and spending habits of people in their 20s just starting their careers, very few of them actually do this – regardless of what they say.

This could be due to a simple lack of discipline now that those first paychecks are rolling in, but the problem could also lie with skipping a couple of crucial steps when it comes to the long-term commitment that is saving for retirement – sort of like living with someone before you date them. You’re ahead of yourself, and it’s easy to get off track.

Generally, I like to break retirement saving into four basic stages, and stage one might not be what you think it is. So, what is phase one? Well, we all know that in order to save money, you have to make money. So, in the simplest terms possible, the first stage of saving for retirement is earning money. When we see clients at this stage of life – first job, paying off loans, navigating employee benefits – the first thing we do is help them establish a healthy budget to see where some savings could be started. We’ll also give some unbiased advice about what to do early on in your career to maximize earning.

If you’re making minimum wage or right above it, finding ways to save for the future – especially a future that seems as far away as retirement does to a 20-something – can be next to impossible. Getting the bills taken care of and feeding yourself are important and take precedence when money is tight.

However, there are ways to get on a path toward higher earnings and more wiggle room to start saving. Are there any certifications you can complete that would increase your worth at your company? Training courses and specialized classes can greatly improve your situation and give you an edge over similar candidates. If you’re open to a side job, this can be a great way to not only earn more money, but try different professions and jobs that could lead to something bigger down the road.

Our team can also help you weigh the costs and benefits of continuing your education versus focusing on work – if that master’s degree only increases your salary by $1 an hour, it might be better to focus on moving up in the company without taking on extra debt for Trump University.

All in all, saving for retirement is important and requires discipline, and, let’s be honest, often takes someone on the other side of the table holding you accountable. But the reality is, saving sometimes isn’t an option for people just starting off in their careers – it’s better to learn to budget and live within your means first so you don’t derail and end up with credit card debt or another financial hole to dig out of.

So don’t hold yourself back from retirement because you don’t think you can save right now – let us help find ways in your budget and your career path to get you started towards that retirement you’re dreaming of.

Stay tuned for next week when explore the second stage of retirement saving. 

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