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When Should You Start Your 401(k)?

by Caldwell Trust

Saving for retirement should obviously be a priority for any adult no matter what your age is. But, with all the other financial concerns you may have, how can you start saving when retirement seems so far away?

A 401(k) is a great tool to help save and grow your money tax-free while you continue building your career. Even still, at first it can be hard to set aside any amount of money from your paychecks, especially if your employer doesn’t offer any incentive like matching your contributions.

So, how do you know when it’s the right time to start contributing to or to start your own 401(k)?

Related Blog: When Should I Start Thinking About Retirement Options?

When To Start Your 401(k)?

With so many other expenses in life, it's easy to put off saving for retirement in lieu of more present expenses.

But the truth is, you should start saving for your 401(k) as soon as you're able to. The more time your money has to grow, the more you'll end up with when you're ready to retire. But, you don't have to invest a lot for it to have a big impact on your future.

How Much Should I Invest in My 401(k)?

If you start in your 20s or 30s, small, regular investments are key and the amount is relative to your total income and how much you can afford to stow away. But, these small payments will add up over time.

What About Paying Off Your Debt?

Some people are hesitant to start saving for retirement because they have debt, but debt shouldn't force you to wait to start making contributions. As long as you have money to save after making regular debt payments, you should consider saving it in a 401(k).

When deciding how much to put toward your debt or your 401(k), it's important to create a careful budget and stick to it, especially when you're younger. Starting good financial habits early in life can have lasting positive effects.

Should You Start Your Own 401(k)?

A 401(k), sometimes with a matching contribution, is a benefit that many employers offer today. If your employer does offer a 401(k) program, always take full advantage of it. If they require that you make a certain contribution for them to match, make sure you make that contribution. While this will make your take-home pay a little less, that money will automatically be invested into a 401(k) that will grow over time.

But, if your employer doesn't offer a 401(k), should you start one on your own? While this is an option, there are other things you can consider. If you're going solo, an individual retirement account (IRA) may make more sense.

In most cases, employers are the ones to offer 401(k)s, and individuals usually choose to contribute to an IRA or a Roth IRA. A Roth IRA differs from a regular IRA in that it may enable your contributions to accumulate tax-free.

Plan For Your Retirement

Whether you're 25 or 45, if you haven't started planning for retirement, it's never too soon (or too late). But the sooner you start, the better. If you're ready to get started, it's a great idea to talk to a financial advisor who knows the ins and outs of investing, so you can make the most of your money. A financial advisor is an expert in making your money grow so that it's there when you need it the most.

If you live in Southwest Florida, Caldwell Trust can help you plan for your retirement and help to take the worry and stress out of investing for you. Our team of experts has almost 30 years of experience with investment management and estate planning. Contact us today to learn more.


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