Retirement planning when you’re young can be hard to think of realistically. How can someone honestly think about something such as retirement, which might not happen for 40 or more years? It is hard to think about when you will retire, how you will spend retirement, whether you will have enough to retire and so on.

Even if you have no idea what you will be doing or how things will turn out decades from now, it is a good idea to start planning for it. Investing and saving for retirement when you are young is much easier than if you wait until you are older and possibly unable to do so.

1. Sign up for your company’s retirement plan

Many company’s offer a 401K or a SEP plan. Why would you turn down free money if they offer a match or completely fund it themselves? Look into this further immediately if you haven’t signed up yet.

You should be attempting to fully fund these accounts every year, as that is most likely the best bet for your retirement, and also the best bet if your company offers a match on your 401K.

Retirement Planning as a Young Adult

2. Ramp up your income

Find the best job that you can qualify for and succeed greatly in your position. Your income in your 20’s and 30’s can be very important when it comes to how much money you will make towards retirement. You should be trying to maximize the amount of money or obtaining a valuable position if you can.

If you start out with a low income, then your income will most likely always be lower. Always strive for the biggest raise that you can get. However not everyone thinks of a job as a “job” and finding your dream job and realizing your true potential is also something very important to strive for.

Also, try forming additional side incomes such as real estate, passive income such as dividend investing and so on. These additional incomes will be great for when you decide to retire so that you have supplemental income.

3. Pay off debt

If you have debt that is at a high interest rate, try your hardest to pay it off. However, not everyone’s goals are to decrease their debt if they are at good interest rates. Either way, whatever your goal or strategy is, try not to rack up unnecessary debt.

Pay off your high interest rate debts and wisely invest the rest of your retirement funds.

4. Try not to rack up credit card debt

I say “try not to” because realistically I know that this avoiding credit card debt is not always possible. If you can avoid credit card debt, then you should. You most likely do not need the latest gadgets every single time that they come out, especially if your expenses are greater than your income.

5. Spend less than you earn

This is a key factor in planning for your retirement. If you can start out young with spending less than you earn, then you have less to worry about as you grow older. Keep a budget if you are not the greatest with the money as well.

If you find that you are spending more than you earn, be sure to either start drastically cutting unnecessary expenses, or find additional ways to make money in your household.

What are you doing to plan for retirement?



Michelle Schroeder is the founder of Making Sense of Cents and Diversified Finances, a personal finance and lifestyle blog about budgeting, traveling, life, and student loans. Read further on her story and life.