What is the best investment for young people?
As a young professional, a lot of young graduate students are busy paying for their rents and utilities. They seldom think about savings for the future. People underestimate the difficulties of saving for retirement when you only can work for 10 more years. A lot of people assumed that they would have ability to keep their living standards after retirement.
Over 50% of Americans do not have enough savings for retirement. Savings for retirement is bringing a lot of stress when people are getting older.
Nowadays, there are a lot of retirement plans for young professionals to choose in companies. Defined contribution and defined benefit plans are two major kinds of benefit plans.
What can savings help young people?
Most people don't want to picture for a frugal life after retirement. However, it is likely to happen without proper plans. Needs for medications and hospital cares can put senior people in a difficult situation. Savings in the retirement plans can help young people to be prepared for retirement age. The more they save when they are young, the more money can be saved with compounding interests. It reduces the pressure of saving before retirement. Having money for retirement is necessary and saving it at young age is the best deal. Power of compounding is going to help young people to grow their savings faster.
What are available tools for young people to save for their retirement plans?
There are several retirement plans that are available for young people. Traditional retirement plan is provided from companies with 401k, 403 B plans, etc. The benefit of those plans is that companies usually match money for employees. Without the help of companies, investing the money into IRA or Roth IRA is a good choice. The power of compounding can help young people to grow their retirement funds easily. If you put 1000 dollars into your account every month with 3% interest for 30 years, you will end up with 573,332 dollars in your account. The standard savings rate in U.S. is 6% currently and it is historically low. 10% savings rate is a good amount to start in order to have a good retirement life. Putting 1000 dollars out of 6000 monthly incomes can be a good starting point. It helps you to save and forces you to leave it until retirement. Some times, young people have a hard time to save money for mortgages of cars and houses. Saving for retirement plan is not their priorities. However, it is much easier to save in earlier ages.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.