 How to save for retirement in your 20s The idea of saving for retirement from as early as your 20s sounds like so much responsibility, especially because you have so many other things competing for your financial attention and besides you barely make enough to sustain or sort out your daily or monthly expenditure. Here's something you need to understand about planning and saving for retirement in the early stage of your life. You'll be able to invest less yet gain more. Taylor Laramore, an American author said, letting your money work for you is a key component of saving for retirement. Compound interest, dollar cost averaging, tax-deferred savings and diversification help lower your risk and boost your return on investment over time. Let me give you an instance that was once reported by CNN Money. Say you start at age 25 and put aside $3,000 a year in a tax-deferred retirement account for 10 years and then you stop saving completely. By the time you reach 65, your $30,000 investment will have grown to more than $338,000 assuming a 7% annual return, even though you didn't contribute a dime beyond the age of 35. On the flip side, if you don't start saving until you're 35 and you save $3,000 a year for 30 years, you'll invest three times as much money but because that money missed out on those 10 years of growth, that larger investment will result in less money, only about $303,000 assuming the same 7% annual return. I'm sure this pretty much explains why you need to consider saving for retirement in your 20s. So, how can you achieve this plan even if you aren't earning that much money? Well, in this video, I'll share with you how to save for retirement in your 20s. If you're new here, consider subscribing so you won't miss other interesting videos like this. 1. Set Financial Goals Retirement planning requires a plan. You need to set financial goals to help you. It isn't just about saving money but about meeting your goals. How much money do you want to have by the time you're retired? At what age do you plan on retiring? How long will you save to achieve this goal? These are all the necessary questions you ask yourself and answer as well. Mike Piper, an accounting expert, once said, the goal of retirement planning is to create a plan. It feels silly to come out and say that but from what I've seen, most investors never actually take the step of creating a concrete plan. Instead, they read a few articles about various retirement planning topics and many investors don't even do that much. The more specifically you've planned how you'll manage your portfolio and your finance in general, the less likely it is that you'll have to go back to work or dramatically reduce your spending later on in retirement. Yes, it's a little overwhelming figuring out what you want your retirement to look like, especially now that you're only just starting your career, but you can start by taking it one step at a time or you can approach an expert for help. Amanda Claimon, a financial therapist, has one of the best suggestions that can help. According to her, it can help to think of the broader goal of preparing for retirement in its component parts. Saving money and putting it aside is one part. Opening an investment account and choosing your allocation is another part. Reviewing and readjusting is another part. Set a timeline for sorting through each of these components. For example, to figure out how much to save, you might want to explore your cash flow plan in detail or play with some retirement calculators to come up with a target. How much time do you think these activities will take, given the other goals and obligations in your life? Number two, pay off credit card debt. Here's where you have to learn to live within your means so that you can avoid or pay off debt. You don't want to live your life from paycheck to paycheck because it'll end up causing you to spend more than you actually earn and eventually run into debt. If you have to, take public transportation. Bring leftovers for lunch, negotiate your bills, don't blow off your bonuses or raises on extravagant purchases. Not only will you be living a debt-free life, but you will also be building a good saving habit because you are living below your means so you can save what's left. Number three, open a 401K account. A 401K plan is a company-sponsored retirement account that employees can contribute to. It allows you to invest money into an account earmarked for retirement without paying taxes on the gains until you reach the age of retirement. Alternatively, another type of 401K allows you to pay taxes on the money now at your current, most likely lower tax rate instead of later when your salary is much higher. A 401 account is mostly offered by employers, have in a situation where it is not, you can open yours or you can sign up for a Roth IRA. You'll fund it with money out of your paycheck that's already being taxed. Four, build an emergency fund. I'll tell you what an emergency fund is to start with. It is a financial safety net for future mishaps and or unexpected expenses. Now that you have started saving for retirement, it's important to build an emergency fund because this will help you avoid tampering with the retirement savings or your financial goals when you run into an emergency. Also, your emergency fund will help you not to rely on credit cards for unexpected expenses such as a car repair and the like. This will help you live a debt-free life. To build an emergency account, consider saving at least six months worth of living expenses. Of course, your goal can increase as your finance grows but have six months worth of your expenses covered and assured in a separate account. Number five, set up a regular saving plan. If need be, automate your savings to make it a habit because it's easier to stay disciplined when something happens automatically. Saving is a way of paying yourself and you should ensure that you pay yourself first once you get your paycheck before spending what's left on the other stuff that you need to. About saving, David Back, an American financial author and entrepreneur, said, Why would you wake up in the morning, leave your family, not do what you want with your day, go to work all day long for eight, nine, ten hours a day, commute back home, get up and do it all over again? Why would you do this five days a week, four weeks out of the month, twelve months out of the year? Why would you do all that to earn money and not pay yourself first? Most people pay everyone else before themselves, the government, their creditors and their bill collectors. Everyone else gets paid first and then if anything's left over, then they pay themselves. That system stinks and is designed for you to fail financially. If that's the system you're using right now, you don't have money, that's why. The odds are set up against you. It's too tough for you to get rich if you're paying everybody else first. You need to change this. You need to completely redirect your income, so the first person who gets paid is you. Your savings should both include one for your emergency fund and another for your retirement account. Thank you very much for watching our videos. If you like this video, watch more videos on our channel and subscribe. We love you.