This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Five Tips for 20-Somethings to Save for Retirement

Legend has it that Albert Einstein once called compounding interest the most powerful force in the universe. Unfortunately, that concept has escaped many of those who would benefit most from it: the 20-somethings who have entered the work force but aren't saving up for retirement.

While it can be hard to justify saving for something that will occur decades into the future, financial advisors say its importance can't be understated.

One reason is that Social Security is far from guaranteed: Without reform, the program will not be able to pay out benefits at current levels, starting in 2041. People who are 22 years old now would typically still have at least 10 years to go until retirement at that point.

Another reason is that compounding interest makes saving early far more profitable than starting late.

As an example, Vincent Barbera, director of financial planning at TGS Financial Advisors, offers two different scenarios: Person X deposits $2,000 into an IRA each year from the ages of 22 to 31, then stops, while Person Y deposits $2,000 each year from the ages of 31 to 65. Both have the same interest rate and allow interest to accrue. Person X will earn nearly $50,000 more than Person Y by age 65, even though the latter contributed $50,000 more to the account over 25 additional years.

With that in mind, here are five helpful tips for 20-somethings who want to start preparing for the future:

  • Put "surprise" cash into an IRA. Instead of spending that $100 birthday present or $600 rebate check, pretend you never received the money and stick it into your retirement savings account.
  • If your company offers a 401K plan, enroll -- even if you put the minimum amount that will be matched. If not, start contributing to your own individual account.
  • 1 of 2

    Check Out Our Best Services for Investors

    Action Alerts PLUS

    Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

    Product Features:
    • $2.5+ million portfolio
    • Large-cap and dividend focus
    • Intraday trade alerts from Cramer
    Quant Ratings

    Access the tool that DOMINATES the Russell 2000 and the S&P 500.

    Product Features:
    • Buy, hold, or sell recommendations for over 4,300 stocks
    • Unlimited research reports on your favorite stocks
    • A custom stock screener
    Stocks Under $10

    David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

    Product Features:
    • Model portfolio
    • Stocks trading below $10
    • Intraday trade alerts
    14-Days Free
    Only $9.95
    14-Days Free
    Dividend Stock Advisor

    David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

    Product Features:
    • Diversified model portfolio of dividend stocks
    • Updates with exact steps to take - BUY, HOLD, SELL
    Trifecta Stocks

    Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

    Product Features:
    • Model Portfolio
    • Intra Day Trade alerts
    • Access to Quant Ratings
    Real Money

    More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

    Product Features:
    • Access to Jim Cramer's daily blog
    • Intraday commentary and news
    • Real-time trading forums
    Only $49.95
    14-Days Free
    14-Days Free
    AAPL $118.03 -0.71%
    FB $105.41 -0.31%
    GOOG $748.15 -0.02%
    TSLA $229.64 5.22%
    YHOO $33.16 0.61%


    Chart of I:DJI
    DOW 17,813.39 +1.20 0.01%
    S&P 500 2,088.87 -0.27 -0.01%
    NASDAQ 5,116.1430 +13.3350 0.26%

    Free Reports

    Top Rated Stocks Top Rated Funds Top Rated ETFs