As a young professional, chances are you aren’t thinking too far into the future beyond next quarter’s sales figures or your next promotion. It’s hard to imagine a time when you won’t be young and healthy, even though logic tells you that one day it will be your reality. Planning/not planning for retirement is something that literally could be a matter of life and death someday.
Retirement plans are an investment in future you. The sooner you start saving for your retirement, the greater the benefit. This is because of the principles of saving called compound interest and dollar-cost averaging. Basically, when you earn interest on money that is in a savings account, that interest gets added to the account balance and then earns interest on itself the next cycle. The balance grows incrementally. Contributing to a 401(k) retirement fund is akin to playing the long, smart game of life when it comes to thinking ahead. It has a snowball effect annually. The longer you stay with it, the bigger the payoff. Ideally, as a young professional, you should seek out a company that will match your employee contribution each month. Hopefully, you will get a corporation that values the investment in long-term employees and shows it through matching contributions.
Dollar-cost averaging takes a static amount of money and invests it in increments. The amount of investment remains the same but the volatility of the stock market means that the price of shares will fluctuate. This means that every month, only the investment value stays the same, not the number of shares purchased. This avoids the worry associated with buying and selling in a panic when the market starts to trend in either direction. The long-term result is that the overall investment averages out better than the personal, more emotional method of monitoring the markets.
There are many things to consider when planning for retirement, even at an early age. There should be firm goals established so you have reasonable expectations of how you will live beyond your working years. Financial planners can help you with goals, but these should be revisited regularly and in the event of any major life changes. You should also make sure you have health and life insurance that will protect you in case of emergencies down the road.