Many young professionals are finding themselves in their first position with a company that offers retirement planning options. Some are already working their way up the corporate ladder, finding themselves in positions with increasing salaries. Some are even seeing their own small business ventures take off. However, when you are 30+ years out from retirement, many of us think we have plenty of time to start saving. I am here to tell you that actually, you are never too young to start financial planning for retirement.
Contrary to popular belief, it is not how much you make, but rather how much you save, that determines your ability to retire. One of the easiest ways to start saving is to think of it as paying yourself first. Allocate 5-10% of each paycheck towards your savings and you will be shocked at how quickly your nest egg can grow!
Factors like the ever-changing market and compound interest are better paired with a long time horizon. This gives our money more time to grow and withstand evolving economic challenges. The earlier you start your financial plan, the higher chance of success you will have.
One of the greatest benefits a job can offer is the employer match within their retirement plans. The issue is that so many people do not take full advantage of this benefit. An employer match means that if your company offers a 100% match of say up to 5% of your salary, for example, you should be contributing at least 5% so that you are reaping the full benefit of the match. If you only contribute 2%, your employer will also only contribute 2%. That is 3% worth of extra money left lying on the table that your employer is willing to contribute to you.
Compounded over many years this can affect your savings by hundreds of thousands of dollars. So if it is financially possible for you, and your employer offers a match option, start your contribution at the match rate. Then you can always increase your contribution amount as your salary grows.
Many of us may feel intimidated by the idea of financial planning, especially for retirement. The different retirement vehicles such as IRAs, 401k, annuities, and pensions can be very complex and difficult to understand. Utilizing your company’s resources is a great place to start if you are in need of assistance.
Many companies offer additional financial planning resources through their plan administrator, the person or company that is responsible for managing the retirement fund on behalf of the company’s employees. Many plan administrators host free financial planning calculators and simulators on their websites. For a more in-depth discussion, you can also set up a meeting with a financial planner through the plan administrator. They often offer complimentary planning advice to help you better understand how to meet your goals.
For a more tailored or technical financial plan, do not be nervous to seek out the guidance of a hired professional. It might be tempting to turn to your friend who has dabbled in the stock market, but consider talking to a licensed professional for financial planning advice. Some young professionals may have family members that use a particular financial advisor. If this is the case for you, that may be a great place to start. If you do not have any connections already to a financial planner, most financial institutions offer financial planning services to their customers. Begin by contacting someone at your local branch or visit your preferred financial institution’s website. Oftentimes, They offer appointment planning with a few clicks of the mouse.
As time goes on the situations we find ourselves in often shift. However, the constant changes in life do not offset the need for financial planning. In fact, it further proves the need for it. Part of the beauty of a well-designed financial plan is the flexibility it can provide. There may be times when you can save a little extra, followed by other times when you need to cut back or dip into savings. This is why it is also important to establish realistic and attainable goals for both the short term and the long term.
Enlisting the help of a professional, whether it is through your employer or an advisor you have found on your own, can help set you up for a successful future. It is important to revisit your financial plan regularly to make any necessary changes and track your progress. Starting a plan now will increase your chances of success, not to mention you will be thanking yourself down the road. Young professionals have many different areas of concern, but retirement and financial planning do not have to be one of them!
The “Next Up” column series is a partnership between the Mississippi Gulf Coast Chamber of Commerce, Coast Young Professionals, and SuperTalk Mississippi. The views expressed by contributors are their own and not the views of SuperTalk Mississippi Media.
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