1. Retirement Planning For 20-Somethings: Introduction
  2. Retirement Planning For 20-Somethings: When You Should Start Planning
  3. Retirement Planning For 20-Somethings: Goal Setting
  4. Retirement Planning For 20-Somethings: Saving Options
  5. Retirement Planning For 20-Somethings: Choosing Savings Accounts
  6. Retirement Planning For 20-Somethings: How Much Should You Add To Your Retirement Nest Egg?
  7. Retirement Planning For 20-Somethings: Signing Up For Retirement Savings Accounts
  8. Retirement Planning For 20-Somethings: Choosing And Managing Your Investments
  9. Retirement Planning For 20-Somethings: Incorporating Lifecycles In Your Planning
  10. Retirement Planning For 20-Somethings: Retirement Resources
  11. Retirement Planning For 20-Somethings: Conclusion

There are differing opinions on the percentage of pre-retirement income an individual will need to finance his or her retirement years. Ultimately, your needs will depend on your planned retirement lifestyle and the amount that would be required to finance such a lifestyle. However, a reasonable estimate can be made so as to design and implement a suitable retirement program. While it is important to add as much as you can to your retirement nest egg, care must be taken to ensure that you do not add more than you can afford, as doing so can negatively impact your financial profile and the amounts that you can afford to add in future years. To determine how much you can add to your retirement savings accounts, prepare a budget to show how much you have available to save.

When creating your budget, be sure to include details about all sources of income and all expenses, as well as your long-term and short-term financial goals. This will help you to determine how much to allocate to your long-term and short-term savings. If necessary, consider cutting back on non-essential expense items to increase the amount available for funding your retirement accounts.

Outstanding debts should not be ignored as the repayments are part of your expenses. If your amount of outstanding debt is high, you may need to implement a debt management strategy to help you pay off your debt quickly.

The Negative Impact of Saving Too Much
Saving more than you can afford may result in a shortage of funds to cover your ordinary expenses. This shortage may result in you being forced to make unwise financial decisions, such as withdrawing amounts from IRAs or using credit cards to cover expenses that should be covered with your income. Withdrawals from your IRA would be treated as ordinary income on your tax return for the year and may be subject to a 10% early distribution penalty. Amounts charged to your credit would accrue interest, which can add up to a significant cost if the balance continuously increases. If this becomes an unmanageable debt, it could force you to allocate amounts towards paying down the debt instead of adding those amounts to your retirement savings.


Retirement Planning For 20-Somethings: Signing Up For Retirement Savings Accounts
Related Articles
  1. Retirement

    Managing Income During Retirement

    Learn some sensible strategies for making your hard-earned savings last for as long as you need them.
  2. Retirement

    Saving for Retirement: The Quest for Success

    We'll show you how to set yourself up to retire in style.
  3. Financial Advisor

    10 Tips for Achieving Financial Security

    Follow this sound advice and plan for a comfortable future.
  4. Retirement

    Top 3 Retirement Savings Tips For 55- To 64-Year-Olds

    Find ways to save money and increase your nest egg for the fast-approaching golden years.
  5. Retirement

    Can You Retire in Five Years?

    The countdown is on. Find out whether you'll be ready to leave the working world.
  6. Financial Advisor

    When to Plan for Retirement Income vs. Savings

    Accumulating a nest egg is the first step in effective retirement planning. The second is making sure you have enough income after retiring.
  7. Retirement

    Retirement Lessons To Teach Your Children

    If your retirement plan hasn't worked out, at least your children can learn from your mistakes.
Frequently Asked Questions
  1. How do you calculate r-squared in Excel?

    Calculate R-squared in Microsoft Excel by creating two data ranges to correlate. Use the Correlation formula to correlate ...
  2. What is the Difference Between International Monetary Fund and the World Bank?

    Learn about the International Monetary Fund and the World Bank and how they are differentiated by their respective functions ...
  3. Where Did the Bull and Bear Market Get Their Names?

    The terms bull and bear are used to describe general actions and attitudes, or sentiment, either of an individual (bear and ...
  4. What's the difference between Google's GOOG and GOOGL stock tickers?

    Learn the difference between Google's GOOG and GOOGL ticker symbols. Splitting shares into classes prevents management from ...
Trading Center