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5 Tips for Starting a Retirement Account When You Get Your First Job

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RetirementYour first job is a major milestone. You can learn a lot from your first job, as well as start down the path toward financial freedom (if you manage your money right).

Unfortunately, too many us start first jobs and our thoughts go to how we’re going to spend our money. When I started my first job in high school — and even when I started my first job after college — I could think of little beyond how I was going to spend my money.

It didn’t really occur to me to save some of my money (even though my parents had tried to drill that lesson into my head), much less open a retirement account and start contributing. If you are starting your first job, it makes sense to pay attention to the future. Don’t forget to pay yourself first. Here are 5 tips for starting a retirement account with your first job:

1. Set Aside Any Amount, No Matter How Small

It may seem silly to contribute $25 out of each paycheck to your retirement accounts, but it’s not. While you aren’t going to fund your future with $25 per paycheck, you will be developing a good habit.

The point is to get in the habit of contributing some portion of your paycheck to your retirement. If all you can handle is $25 per paycheck for now, set that aside. But set aside something.

2. Make It Automatic

One of the best things you can do to ensure that you always have “enough” to make your retirement contribution is to make it automatic. Most employers will allow you to make contributions to the plan before your paycheck is cut. Others will directly deposit the amount in the investment account of your choice.

Even if you have to use an IRA or some other non-sponsored plan, and even if your employer won’t deposit that money for you, you can have the money automatically transferred from your checking account to your retirement account. If you don’t have to think about it, and you adjust your spending according to your after-savings paycheck, it won’t be an issue.

3. Try to Max Out Your Match

Some employers still offer matching contributions when it comes to your retirement account. This is free money for your account. Do your best to max out your match. That way, you will get the maximum amount of free money for your future.

4. Look for Low-Cost Options

Don’t throw away thousands of dollar on fees. Do a little research into your retirement plan. Find out if there are low-cost fund options. ETFs can be especially inexpensive and quite helpful to your portfolio. Also, consider the administrative costs with your plan. In some cases, it makes sense to do what you can to get the employer match (if there is one) and then invest in something else with the rest of your money.

5. Don’t Treat Your Retirement Account Like an Emergency Fund

Remember: Your retirement account isn’t an emergency fund. In most cases, withdrawing money from a tax-advantaged account before the age of 59 1/2 means a 10% penalty plus taxes. Even if you take advantage of lenient policies for a Roth IRA, you still can’t replace the time you lose while your capital wasn’t earning interest.

(Photo: Tax Credits)

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3 Responses to “5 Tips for Starting a Retirement Account When You Get Your First Job”

  1. As an almost retired person, I can look back and say that this is excellent advice.

    However, even though I knew that setting aside a bit of every paycheck for retirement was the wise thing to do, I didn’t.

    You see, I really never believed I would get old and so retirement savings just didn’t interest me. Many young people have an “invincibility shield” around them, and I was very guilty of that.

    So, my advice to all the young people who read these excellent articles: pay attention and prepare this Bargaineering way for your retirement now. You WILL one day need it.

    Mahalo Miranda, for a good one!

    Aunty

  2. admiral58 says:

    I’d look into TD Ameritrade or Fidelity and get some low cost ETFs for the account.

  3. I decided a long time ago that I’m never going to get old… I’m never going to retire because I enjoy working. But that little bit of consistent saving and fortunate investing I did sure has provided some comfort just in case I change my mind.


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