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If I could do it again: retirees provide investment advice to young self

If you have ever spent time talking to retirees about their lives, you will know that they can provide some great stories, and sometimes even great advice, for everything from relations to money. A recent Principal study asked retirees to share some financial advice they wish to give their young self. The first five answers listed below appear over and over again.

Following these tips may not prevent us from making mistakes again, but if you stick to them as much as possible, you can get a good opportunity in a comfortable future.

Old man looking at young people dressed in the same

Image source: Getty Images.

1. Start your retirement plan early

Nearly 70% of retirees said they would encourage young people to start planning for earlier retirement in their lives: if possible, please be under 20. This is not always easy to do, especially for college graduates who are burdened with large student loan debts. But even if you only save a few dollars each month, it is worth setting aside for retirement.

Your early retirement contributions are usually the most valuable in the end because they have more time to grow. If you invest $100 today and get an average annual rate of return of 7%, then 40 years later, it will be worth close to $1,500. That is a profit of $1,400. However, if you wait five years to invest this $100, you will end up with about $1,068 in 35 years, which is $400 less.

Even if all you have is the $5 or $10 banknotes that you have left in your wallet after paying the bills and creating emergency funds at the end of each month, invest. This will make it much easier to save enough for retirement, because you will get more investment income to help you pay for your expenses.

2. Continue to educate yourself about finances

There is always more knowledge to learn about managing finances. This is especially true for retirement plans, because it takes decades, and many changes may occur during that time, including government rules on retirement accounts and our own lifestyle and retirement plans. We must know how to adapt to these changes so that we can consistently achieve our goals and make the best choice for our money.

One of the ways to ensure that we can do this is to keep asking questions and trying to do better. For example, knowing more about how to invest can help you choose where to store your retirement savings more wisely so that you can accumulate savings faster, and even retire sooner than expected.

3. Stay healthy

Staying healthy may not sound like financial advice, but your health and finances are easily intertwined. If you are in poor health, you may see your doctor more often and pay more for prescription drugs. You may also be forced to retire early, which makes it difficult for you to struggle with the money you need to save until that moment.

Paying attention to your health by eating right, exercising regularly, and learning healthy strategies for managing stress may not help you completely avoid medical expenses in retirement, but it can reduce these expenses. This can make retirement longer and happier, and you can spend more money on things you like instead of on doctor’s bills.

4. Balance future savings and today’s life

If you want to retire, saving for the future is vital, but you must also meet current needs. This movement called “Financial Independence” encourages people to cut their budgets to a minimum, and this is usually to give up happy activities, so they can save as much income as possible and retire earlier than their peers. This method is inherently correct, but it is not appealing to everyone.

Not allowing yourself to do anything in the present will make it more difficult to stick to your savings plan in the long term. It is best to develop a long-term sustainable plan. Figure out how much you need to save each month to retire. If that is not feasible, consider postponing retirement or looking for current ways to increase your income so that you can save money for your future and have some money to enjoy.

5. Use employer 401(k) matching funds

Nearly 40% of the retirees surveyed said that they would encourage young people to choose a 401(k) deferred percentage so that they can take advantage of the company’s competitive advantage. This is free money to plan for the future, but this is a limited time offer. If you don’t invest enough money in your 401(k) to get the game during the year, you will be forfeited.

Hope you have contributed at least enough to your 401(k) to get a complete match, but if not, the first step is to figure out how your company’s matching system works. Some people may provide a U.S. dollar to U.S. dollar match, while others may provide USD 0.50. Most companies will limit your matching by a certain percentage of your income.

Once you know what you need to do, try to increase your donation accordingly. You may need to change your budget, but it is worth doing because it can reduce the amount you personally need to save for retirement.

The five responses above are the most common financial advice offered by retirees, but they are not the only advice worth following. Consider your own financial history and what you want to improve. Then, seek advice on how to do this.

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