Retirement Planning for Millennials: Start Early, Retire Wealthy

The Power of Starting Early

Compound growth turns small regular investments into substantial sums over long periods. Someone who invests consistently from age 25 will accumulate significantly more than someone who starts at 35, even if the late starter invests larger amounts. Every year you delay makes catching up harder.

Maximizing Tax-Advantaged Accounts

Take full advantage of retirement accounts that offer tax benefits. Contributions may reduce your current taxable income, and investments grow tax-free until withdrawal. If your employer matches contributions, prioritize capturing that full match before investing elsewhere.

• Employer retirement plans often include matching contributions
• Individual retirement accounts offer additional tax benefits
• Tax-free growth accounts provide flexibility for future withdrawals
• Contribution limits increase periodically, so stay informed

Asset Allocation for Long Horizons

With decades until retirement, you can afford to take more risk in pursuit of higher returns. This typically means a higher allocation to stocks versus bonds. As you age, gradually shifting toward more conservative investments helps protect accumulated wealth as you approach retirement.

Avoiding Common Mistakes

Young investors often make preventable errors that hurt long-term results. Trading too frequently, chasing past performance, and trying to time the market all tend to reduce returns. Consistent investing through market ups and downs typically beats trying to be clever.

Balancing Present and Future

Retirement planning should not mean sacrificing your entire present for an uncertain future. Find a sustainable savings rate you can maintain consistently. Automate contributions so saving happens without requiring willpower. Gradually increase savings as your income grows.