While it’s easy to get a victoria secret credit card, head on out and continue to go on a shopping spree, making it so that once you receive your paycheck, pay bills, and go shopping, there isn’t much left at all.  What is more important than going to the store and buying unnecessary items, is actually securing your future by building an emergency fund in case there are any unexpected charges that come up like an appliance breaking down, a needed car repair, or medical bills that pile up.  Beyond that though, is making sure that you have enough to live off when you finally do walk away from work, and now is the time to ensure that 401k contributions are to the max, the earlier the better.

Retirement Comes Quick

If you stop to think about how long you have been in your current job, think about how long it’s been since you finished school.  It probably has flown by and made you sad for a minute on how quickly time has passed.  While this isn’t meant to be depressing, it’s to point out that as fast as time has gone by, imagine how quickly it will be until retirement, and what if you don’t have anything to show for it?  By starting to contribute the earlier the better, the more time it has to grow, and more funds to add up.

What Type of Lifestyle do you Want

The amount of income that you will need in retirement depends on what lifestyle you want to have.  If your current lifestyle includes traveling, going out to eat, while having new car leases and modest home, then you probably want that to continue.  By having nothing saved for retirement you will be relying on social security, which we know may or may not be there by the time we retire, but still won’t be enough to continue living your current lifestyle.  The more you are able to save now, the more you can count on having later to continue to enjoy life, even when you walk away from work.

At Least There’s a Tax-Break

While you will have to pay taxes on the amount you withdraw later in retirement, at least right now you can get a tax break by contributing right now and easing your tax burden a bit.  This could be a benefit later on if income will be lower and can therefore be taxed at a lower rate.  There are options to be taxed now like a Roth IRA, but may want to take that up with a tax professional to ensure which is the right move, especially when it comes to your finances.

Annual Contributions Are Pretty High

As we are continuing to figure out the new tax reform, in 2017 the maximum that you could contribute to a 401k account was $18,000 and has now raised to $18,500 if you are under 50 years of age.  Over 50 years of age and you can contribute now as much as $24,500.  That is great, but if you think about $1,542 a month under 50, $2,042 if over 50, that is a significant amount of money each month, making it all more important to start early on so you don’t have to scramble later on.

Don’t Miss Out on Free Money

One of the benefits to contributing to a work 401k account is that companies can kick in contributions as well, so let’s say you make $50,000 a year and employers will match up to 6%, you will contribute $3,000 per year, while getting an additional $3,000, so for the $6,000 total and 12% contributions, $3,000 of that is free money and just think about that free amount every single year, building up in investments and figure that half of your 401k account balance was just because you had help from your employer.  Beyond the maximum to hit employer contributions, you can look to increasing a percent each year, although won’t be matched, but you can continue to have your contributions increase every year and add to your available funds later on.

Investments are Flexible

While it’s always encouraged to share with a tax professional if you’re not completely comfortable making financial decisions, but the good thing about 401k accounts is that the investments are flexible.  You can set up age-based programs where the aggressiveness may decrease as you get older, so it’s important to find what your long-term goals are as far as risks and rewards to your investment portfolio.  Maybe you want to play it safe and “guarantee” more of a return.