When you’re in your 20s and 30s, retirement may be the furthest thing from your mind. Entry-level employees on a lower salary may defer 401(k) participation or contribute the bare minimum, promising themselves that they’ll save more when they earn a raise.
It may be a stretch for your budget to set aside the IRS cap of $18,500 per year, but it’s never too early to start ramping up your retirement savings. According to AARP, a retiree needs to have nearly $1.2M saved up to enjoy a $40,000 a year, 30-year retirement.
Here’s what eight members of Forbes Finance Council recommend younger workers consider as they think about their future retirement.
1. Life expectancy is increasing, which means a potentially longer retirement.
How much Social Security will pay in the future — if any — is always one question. Longevity will be the other. Medical breakthroughs, both discovered and yet-to-be-discovered, will increase the life expectancy of future retirees. Some people may have a 40-year retirement, even if they retire at 65 or later. This may result in needing a larger nest egg, so saving earlier becomes more critical. – David Frisch, Frisch Financial Group, Inc.
2. You can’t plan for social security.
The Congressional Budget Office takes an inventory of inflows and payouts of social security. Without any modification to the system, those born in the 1960s still have a high likelihood of receiving what was promised. Those born in the 1980s have a much lower chance of receipt. Therefore, the younger demographic must plan without depending on the social security system in retirement. – Darryl Lyons, PAX Financial Group LLC