How to plan for your retirement in your 20s

Retirement may seem like a long way off, but starting to save for retirement early will greatly benefit you down the road. Learn how to start preparing for retirement from an early age.

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If you're in your 20s, retirement planning is probably No. 2,515 on your priority list, sandwiched between learning how to build a lawnmower and discovering a planet. However, you'll hear a lot of people in their 50s and 60s say the same thing:

"I wish I'd planned better for my retirement when I was young."

It's not just finances either, that trip people up later in life when simply walking and maintaining balance is hard enough without the additional mental and material stress of retirement anxiety. Here are things to do in your 20s that will make you physically and financially sounder as retirement nears, when those issues will surely be at the top of your priority list:

Financial planning

The best thing you can do in your 20s is to develop a relationship with a capable, trustworthy, and likable professional financial planner. You may not have a lot of money to invest or save right now, but when you do, you'll need help making the right decisions because there are hundreds of options—and it can get very, very complicated.

Many young people take financial advice from parents, a rich uncle, a successful colleague, or other well-meaning friends and connections. But this is a dangerous approach. People such as these have the best intentions, but what worked for them may not work for you. There are lots of things to consider in terms of risk tolerance, tax implications, and more. A professional knows how to systematically analyze the variables, and build a short- and long-term financial plan that's sensible for you, not Uncle Nigel.

Get to know a pro. Vet candidates carefully. When you find a few who seem capable, trustworthy, and likable, let them know the details of your current finances and what you expect to be earning over the next few years. Then ask a simple question: "What would you do if you were in my shoes?" The answer you like best is going to be from the individual who is the best choice for you.

Estate planning

Connected to financial planning is estate planning. Estate planning deals with the issues of how to protect your assets once you accumulate them, and also how to pass on your wealth when you die. An estate plan will change continually over the years as your assets and family members change. But again, it is helpful to establish a relationship with an estate planning professional when you're in your 20s, especially if you have a spouse and/or children.

When it comes to financial and estate planning, you probably have immediate as well as long-term issues to consider. For instance:

  • Should I contribute to my 401(k)? If so, how much? You may be surprised at how even small amounts invested now mushroom over the course of several decades.
  • Do I need a will?
  • Do I need life insurance? If so, how much, and who should the beneficiaries be?
  • Should I buy or lease a car?
  • Should I buy or rent a house?
  • What's the best way to handle health insurance?

Scores of questions like these come up every year. If you improve your decisions, the value adds up over the years in a big way.

Lifestyle and career issues

Of course, money is only part of a happy retirement—it means everything if you can enjoy the material things you have accumulated. It seems to me that people in their 20s have a better appreciation of this than we Baby Boomers did; the importance of work-life balance wasn't a pressing issue for many people in my generation, who were just happy to have a job.

But it's not just work-life balance today. Lifestyle and career decisions you make now affect outcomes you may not feel the full force of until retirement draws near. So, here are a few issues to consider:

  • Where do I want to live, to put down roots? What will make sense for my career, my family, my/our lifestyle and cost of living? There's nothing wrong with relocating or living somewhere exotic when you have the opportunity. But it often becomes much harder to move as the years pass and you become invested in a job or a neighborhood.
  • Is my work sustainable? One challenge of the "gig economy" is that it leads people away from committing to a long-term career path. It's worth asking, though: "Is the work I'm doing now something I want to do 10, 20 years from now? Will this work give me the kind of income growth I'll need 10, 20 years from now?" Changing careers gets harder as the years pass. The last thing you want is to be trapped in a dead-end job and no longer have the energy, financial flexibility, or marketability to make a change.
  • Am I keeping myself in good physical shape? It is very, very hard to pick up an exercise habit when you're in your 40s or 50s or older, but it is very easy to let yourself get incredibly out of shape when you're in your 20s and 30s. If you've been putting off that trip to the gym before or after work, your year 2045 body will thank you profusely if you make it part of your routine now.
  • Am I keeping myself in good mental and spiritual shape? There's the stereotype of the crusty, cynical senior citizen stuck in his/her ways—a stereotype that is all too often a reality. Keeping your mind and spirit youthful takes as much work as keeping your physical body in shape. That's hard to do sometimes in your 20s, when work and family consume so much time and energy. Nevertheless, cultivating good mental and spiritual practices pays off now and later. Reading, further education, travel, meditation, and faith are all ways people stay fresh, positive, open, and able to take things in stride. For many, physical exercise plays a part in this as well. Act now, and fend off the demons of bitterness, anxiety, and anger.

All of these questions and issues are present whether you choose to deal with them or not. But the longer you put them off, the more likely you'll become overwhelmed when you are finally forced to make decisions. A slow and steady pace to retirement planning helps make things smoother and easier later—and will also give you a lot of peace of mind and confidence today.

Topics:
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  • Saving for Retirement
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Article copyright 2017 by Forbes. Reprinted from the September 27, 2017 issue with permission from Forbes.
The statements and opinions expressed in this article are those of the author. Fidelity Investments cannot guarantee the accuracy or completeness of any statements or data.
This reprint is supplied by Fidelity Brokerage Services LLC, Member NYSE, SIPC.
The third-party provider of the reprint permission and Fidelity Investments are independent entities and are not legally affiliated.

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