To calculate a realistic retirement goal, you could try to envision your life in retirement, but that’s pretty hard when you’re in your 20s. When you’re young, it’s not so much about how much you will need in retirement, but rather, what’s the highest possible amount you could have?
The more money you have, the more options you have. You may not know where you will be 20 or 30 years from now, but wherever it is, you’ll want as much money as possible. There are lots of retirement calculators online if you enjoy running scenarios. It can be eye-opening, and even fun, to play around with what would happen in different circumstances. For example, how much might you have if you contribute 10-15% of your salary to your 401(k) every year and your salary increases steadily until you retire in 30 years?
FINDING MONEY TO INVEST
In addition to time, the other key ingredient to maximizing your returns is to invest as much as possible. That doesn’t mean that you should be irresponsible — your bills and living expenses come first — but anything extra you can throw into savings and investments will pay off.
Many people live paycheck to paycheck, so finding money to invest seems unrealistic. But what about “extra” money, like gifts, bonuses, inheritance and tax refunds? These unexpected windfalls can kickstart a retirement account, then you can contribute small amounts over time. The more you can put in and the earlier you start, the faster it will grow.