There are plenty of money-related lessons to be learned in life. The importance of following a budget is one of them, as is avoiding debt whenever possible. But when asked what the most important piece of financial advice would be to pass on to younger generations, Americans overwhelmingly agreed that it's the need to save for retirement. That's the latest from Comet, which also found that 43% of the folks they surveyed aren't on track with their nest eggs.
If you've yet to start thinking about retirement, which may very well be the case if you're younger, then consider this your wake-up call: The sooner you start planning and saving for this major milestone, the greater your chances of actually getting to leave the workforce when you want to and live a comfortable lifestyle in the years that follow.
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Always have an eye on the future
Why is it so important to save for retirement? It's simple: Social Security won't be enough to sustain you when you're older. In a best-case scenario, it will replace about 40% of your previous income, assuming you were an average earner. Most seniors, however, need about twice that amount to cover the bills, and that means it's on you to come up with the rest by building a nest egg.
Thankfully, you have a number of choices when it comes to establishing long-term savings. If your employer offers a 401(k) plan, you can sign up and have a portion of each paycheck sent directly into savings. You can contribute up to $18,500 annually if you're under 50, or $24,500 if you're 50 or older, but if those thresholds sound unattainable to you, just do the best you can -- it's certainly better than nothing.
If you don't have access to a 401(k), you can open an IRA through most financial institutions. The current annual contribution limits are much lower than those of a 401(k) -- $5,500 for workers under 50, and $6,500 for those 50 and over. On the other hand, it's easier to max out an IRA than a 401(k) because of these lower thresholds, and while both accounts offer a host of investment options, IRAs tend to come with a significantly wider ranger of choices than 401(k)s.
Speaking of investing, you'll want to invest your savings wisely to ensure that your money grows. In this regard, stocks are truly your friend, especially when you're young and have a long investment window ahead of you. If you're iffy about putting your money into individual stocks, there's always the option to go heavy on index funds. Not only are they a cost-effective option thanks to their low fees, but they're also a good way to build a diversified portfolio without having to do the same amount of research individual stocks would normally require -- though you should always research any investment you're thinking of putting in your portfolio.