Are you a millennial? Retirement is probably the last thing you are thinking about. People in their 20s and 30s “go through more life transitions than at any other age – you’re getting out of college, you’re graduating, you’re getting a job, you’re changing jobs, maybe you’re starting a business, you’re getting married, you have kids, you take on debt, you buy a home. All of these things are happening, and the last thing you’re thinking of is saving for retirement. It should be one of the first things you are thinking about.

Here are a few common pitfalls in your 20s and 30s as it relates to retirement:

MISTAKE #1: Not Starting Early

I often hear, “I will start saving when things settle down” or “I will start thinking about retirement when I start making more money.” In my experience, you rarely will ever say, “Now is the perfect time to start saving!.” Instead, prioritize saving and make it a habit from an early age. Wasting the power of time is a huge mistake.

“The greatest money-making asset any individual can possess is time, and young people have more of it than anyone else,” says Ed Slott, a retirement expert.

“Let’s say you did nothing but put $5,500 in a Roth IRA. And that’s all you did. You made a habit every year of never missing a Roth contribution. If you did that starting at age 25 to 65, you’d have over a million dollars tax free for retirement,” Slott says.

MISTAKE #2: Not having a Roth IRA

Open a Roth IRA, which offers tax-free growth and tax-free withdrawals in retirement, though you do pay taxes on the money you contribute. Roth IRAs come with income restrictions. However, if you qualify, its a no brainer. Tax free withdrawals means you’ll never pay taxes on that money. That’s where you want to be in retirement, because it takes out the uncertainty of what future tax rates could do to your retirement savings.

Remember a Roth IRA is different than a Traditional IRA. While the traditional IRA gives you an immediate tax deduction, withdrawals are taxed at the prevailing tax rates. That is a big difference.

MISTAKE #3: Raiding your retirement account

“I have plenty of time to catch up and replenish the amount I am taking out.” This is a common rationale I hear clients say when they are wanting to dip into retirement funds. This is a huge mistake. Once you dip into your retirement once, it makes it much easier to do a second time, and then a third. When you sign up for a retirement account, think about that money not being available until retirement.  It is off limits. And once saving becomes a habit and you see the money grow, you’ll be less likely to touch it.

MISTAKE #4: Not knowing whether you have a Roth 401k at work

If you do not qualify for a Roth IRA due to income limitations, check to see if you have a Roth 401k option through work.  The great thing about the Roth 401k option is that it is not subject to income limitations. This will allow you to get the same tax-free growth and tax-free withdrawals in retirement.


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