Retirement planning is a very important matter for all employees, whether they are new employees or experienced employees. Everyone has concerns about retirement.
You may be a young, energetic person who has only been in the workforce for 2-3 years, who is in the process of establishing yourself, who has been around long enough to know how to survive in the workplace, or you may be a seasoned veteran who has been immersed in the career you have been building for many years. It seems that you still have many years left before you reach “retirement.”
Talking about retirement to people in their 20s and 30s is almost useless. Everyone almost walks away. You are just entering adulthood. Why talk about planning for old age? Right?
But wait, for buying a car or a house, if you pay in installments, it can take decades to pay off. It takes many years of working people’s time. For a house, it can take decades. In addition, investing or buying stocks to build a solid financial foundation for the future doesn’t take just one or two years to complete. What about family and education responsibilities? What do you think you’ll be like when you reach 60 years old?
“You have to accept that people who plan for their retirement have an easier path to financial security.”
The truth is, young people who plan ahead and prioritize their retirement often have an easier path to financial security than those who wait until they are ready or near retirement age. But don’t fret too soon. This article will teach you what to do in your 20s and 30s to put yourself in the best position to retire with a healthy and quality life.
In my 20s
Your early 20s are the age when you just graduated and face a huge change that can be called the age where “fun is over.” Even though studying is not that fun, having friends, studying together, or meeting up with friends to eat together at the cafeteria is still quite fun.
“It’s a tough time to think about retirement.”
The first decade of adulthood is no fun. If we were to talk about retirement, the answer would be how to find a stable job. Entering the workforce, not only do you have to face the reality that “your pay may be lower than you thought,” you may also face unemployment, student loans, housing costs, or all your friends who graduated with jobs have found jobs but you still haven’t found one. So, there’s little doubt that retirement is the last thing on your mind at this age.
Everything you do in your 20s will help ease what you need to do in the future for a great retirement. Here are three important tasks to tackle in your 20s:
1. Create an emergency fund: This may seem like a trivial part of retirement planning, but it’s an important part of getting your finances in order. Having an emergency fund of at least $1,000 can help keep you financially stable and resilient against uncertain times.
“Having a habit of setting aside money will help smooth out your retirement plans.”
Setting aside money in an emergency fund will help you plan for your retirement. This money will protect your foundation if you are laid off in the future. But it is important to understand that an emergency fund is not a retirement savings fund, but a lump sum that you can use in an emergency without affecting your retirement savings.
2. Take advantage of compound interest: Interest on investments multiplies over time, meaning that every penny you invest at age 20 could add up to a huge sum on your 60th birthday. Assuming an 8% rate of return and you wait until you’re 35, $1 (at the current exchange rate on June 6, 2023, $1 is 34.80 baht) could potentially become $16 (or about 556.80 baht) by the time you’re 70.
“Let the money work”
The amount you invest in retirement accounts since your 20s is money well spent. This type of savings doesn’t sit still; you simply let your money work for you. The sooner you start investing for retirement, the sooner your money can go to work, which means the bigger the return on your retirement.
3. Create an investment habit: If talking about retirement is boring, let’s talk about investing. Especially in this era, there are many investment options to choose from, whether it’s mutual funds, stocks, real estate, or others, which is certain that there must be an option that meets your investment needs.
“Because your 20s are the age when you are likely to have the lowest income, but you should be the age when you learn the most about investing.”
At a young age, you can still take a lot of risks, so our advice is to try to study different investment options, start with a small amount of investment, and focus on practicing investment continuously. These things will help you understand investment and become an expert in your own way in the future.
In your 30s
Turning 30 often means feeling settled and secure in your career and finances (assuming you weren’t heavily in debt in your 20s). But on the other hand, this is also a prime time to make bigger, more substantial moves, like buying a home, getting married or having kids. Here’s how you can plan for retirement in your 30s:
1. Match with employer benefits: At this age, you are likely to work in a job that provides a retirement fund. Currently, many employers are focusing on this issue. Provident fund benefits are another factor that attracts people to work. For example, many companies or organizations have a provident fund policy that provides 100% employee contributions. That is, if employees choose to deduct a certain percentage of their salary, such as 3%, 5%, 10% or 15%, the company or organization will match the same amount. The salary deduction figure is the right of the employees to determine, and the company’s contribution figure depends on each company’s policy on how much to give.
To make it easy to understand, let’s say you have a salary of 20,000 baht per month. We choose to deduct 10%, which is 2,000 baht, as a provident fund. The company will also contribute another 10% to us. This means that we will automatically receive an additional salary from the company of 10%, which is 2,000 baht. Both of the money, 10% of us and 10% of the company, will be invested in various funds, which is a long-term investment. Along the way, we will receive tax deductions and can be passed on as money for our future retirement.
2. Set a goal to save your salary: It can be hard to know if you have the money you need to save for retirement, especially when you have decades left in your life. A good general guideline is to set a goal to save for retirement three times a year until you’re 40. Setting this goal will help you focus on investing consistently into your 30s. Having these competing financial priorities can make saving for retirement much easier.
Conclusion
You may be thinking that retirement seems too far away, more than a decade away from your life. Thinking about it now may seem easier and more visual, but planning for retirement is important. Investing for retirement in your 20s and 30s will give you a better retirement plan than those who start thinking about it just 5 or 10 years before retirement.
So it’s never too early to start planning for your future. So if you’re not ready to start planning for the life ahead, start thinking about retirement plans for decades to come. You’ll be thanking yourself in your 20s or 30s when you retire.
“Start planning your retirement, end future financial stress now.”
Reference:
Retirement planning tips for Gen Z
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