20s, 30s and 40s

MOST OF US HAVE all kinds of financial desires, including a nice home, a fancy car, a good education for the kids and a fun trip next summer. But retirement should take precedence, even in our 20s.

Think of it this way: You can take out a loan to buy a house or car, and your kids can borrow to pay for college, and then slowly pay the money back. But when it comes to retirement, you’ll need to start out with a heaping stack of dollar bills.

Moreover, retirement is significantly more expensive than these other goals, in part because you need to be so cautious when spending down your savings. Financial experts often talk about a 4% withdrawal rate. Translation: For every $100,000 you have saved by the time you quit the workforce, you can reasonably expect to pull out $4,000 in the first year of retirement. Want $60,000 in portfolio income during retirement? You will likely need to sock away something like $1.5 million. To amass that sort of money, you will probably have to save diligently starting soon after entering the workforce.

Even if you’re a good saver, that still leaves lots of decisions—including which accounts to stash those savings in, precisely how much to save every year and which investments to buy.

Next: Put Retirement First

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Articles: Spending Deferred and Terrible Twenties

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