Retirement Planning for College Grads: Five Strategies

Retirement planning is important at every stage of life, but the earlier a person starts saving the more successful they are likely to be; here are five strategies that young adults can put into action so they can retire early and comfortably

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RetirementPlanning.net

Sep 30, 2010, 04:00 ET

NEW YORK, Sept. 30 /PRNewswire/ -- As soon as a college graduate enters the workforce, they should start retirement planning in order to put themselves in the best possible position to start saving. RetirementPlanning.net offers five strategies to better ensure a successful retirement.

1. Start stashing cash early. Although many employers have a waiting period before employees can take part in benefits, as soon as they are available they should be taken advantage of. The sooner funds are put into a 401k, the sooner they will start compounding over the decades. Whenever an employee gets a raise, they should increase their contributions to their 401k.

2. Take advantage of the 401k match. If a company offers a 401k match as an incentive for retirement planning, employees should participate up to the maximum match level. This could increase saving by $1,000 annually. Additionally, any amounts that are placed in a 401k are tax free, which means no income tax will be paid on this amount.

3. Consider a Roth 401k when creating a financial plan. If a company offers a choice between a traditional and Roth 401k, an employee should consider a Roth 401k. Traditional 401k deposits offer a tax break in the year the deposit is made but income tax is due when funds are withdrawn. Roth 401k contributions are made with after-tax dollars, and withdrawals in retirement are tax-free.

4. Evaluate auto settings. Some companies set up automatic enrollment in to retirement accounts. However, these should be examined very closely to ensure they are the best choice for the individual. These should also be evaluated periodically.

5. Rollover retirement savings. When an employee leaves a job, they should not cash out their retirement account. It should be moved to the new company retirement account, left in the old account, or transferred to an IRA. These options will avoid any penalties and will continue the tax-deferred growth.

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