Financial Planners: 5 Retirement Habits I'd Start in My 20s If I Had To Do It Again
If you ask people nearing retirement what they wish they'd done differently in their 20s, many will say they wished they started sooner. It can be hard to see at the time why certain habits snowball into lifelong wealth while others can derail retirement before it's even on the horizon, but later in life it becomes obvious.
We asked financial planners what they'd do differently if they could go back to their 20s — here’s what they said.
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1. Always Capture Your Employer Match First
The experts agreed on one key strategy: never leave an employer match on the table.
Chad Gammon, certified financial planner (CFP), retirement income certified professional (RICP) and owner of Custom Fit Financial, is grateful to a co-worker back in his younger years who pushed him to contribute to his company 401(k) to get the employer match. “That habit has paid off and it is a good one even today," he said.
On the other hand, Corinna Rose, CFP and accredited financial counselor (AFC) at Bell Investment Advisors, has regrets about leaving money on the table because she didn’t understand the fact that it is “free money.”
2. Start Investing Early — Even If Only a Little
Many young adults believe retirement investing is something they can only start after promotions or raises. Yet they’re overlooking the thing they have in abundance: time.
Rose pointed out that thinking that saving for retirement should happen later is a set up. “This mysterious timeline of later never arrives if you keep pushing it off,” she added. She said saving for retirement should happen as soon as you start participating in the workforce.
Taylor Kovar, CFP and CEO of 11 Financial, suggested that a great early habit he wishes he had built sooner “is getting money moving into an account automatically, even if it's a small amount at first.”
3. Increase Your Savings Automatically as Your Income Grows
Rather than trying to jump from saving 3% to 15% overnight, think of retirement saving as something that evolves alongside your career.
Gammon pointed out that many retirement plans have an auto increase where your savings can go up 1% each year. “It is an easy way to increase your savings and it won't feel like an impact to your lifestyle over time," Gammon added,
According to Rose, the importance of this saving can’t be underestimated: “The more you can save, the better financial situation you'll be in the future.”
4. Stop Letting Cash and Lifestyle Inflation Hold You Back
Building wealth is also a process of avoiding habits that quietly drain your long-term progress. Such as keeping too much money in cash.
"Cash is for goals around the corner; investing is for goals over the horizon,” Rose explained. “[Without investing] you risk losing purchasing power to inflation and missing out on decades of compounding that can turn modest contributions into substantial wealth," she said.
Add to that the fact that many banks pay “hardly any interest and even high-yield savings accounts have a hard time keeping up with inflation,” Gammon explained — and you’ll find investing to be the superior wealth building option.
Additionally, overspending and keeping up with others drains away money that could be invested. But investing doesn’t have to be stressful, Gammon said, it can be fun if you connect with “likeminded people” to share saving and investing advice.
5. Think Long Term and Don't Try To Outsmart the Market
Successful retirement investing is surprisingly boring and steady investing beats market timing. Kovar cautioned against checking your investment accounts “every time the market dips” or reacting to them in the moment. “It's a long game and getting pulled into short-term swings can work against people more than it helps," Kovar added.
And Gammon reminded that wealth building takes time: “Make it into a game and track how you are doing. Over time it is amazing to watch the growth."
If saving for retirement feels daunting, these financial experts all pointed to a handful of basic habits: capture the employer match, start early, increase contributions over time, invest rather than hoard cash, avoid lifestyle inflation and stay invested for the long haul.
"If there's one thing I'd want a 20-something to hear, it's that nobody really feels ready,” Kovar added. “You just start where you are and adjust as you go."
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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