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If you’re a Gen Zer, you’re starting to become your own now. Chances are, you’re in your first real job or working part-time while waiting to complete your studies.
Irrespective of your working level, you have access to valuable opportunities to save for your future. And the beauty of this is that you have time on your side.
While finding money to save when you’re starting may seem challenging, taking advantage of the following strategies can help significantly grow your savings by retiring.
1. Match Your Investment Strategies to Your Long-Term Plan
Regardless of which type of retirement-saving accounts you decide to operate, invest your cash with a long-term mindset.
Because you don’t need to use the money in 30 years or more, you have time to ride the ups and downs of a gold investment retirement account for a chance to enjoy tremendous growth over time.
You have decades until you need the money, so you can also invest aggressively in stocks. Of course, your exact allocation depends on your overall goals and risk tolerance. Still, be sure to diversify your portfolio across multiple assets.
The best part?
You don’t have to make all these decisions yourself. Most 401 (k) and gold IRA companies offer target-dates funds, making it easy to maintain a diversified portfolio that matches your timeframe.
2. Save for Your Future in a Health Savings Account
Operating a health savings account can be a valuable strategy to put money aside for retirement.
Sure, this sounds strange because the account helps you accumulate savings for out-of-the-pocket medical expenses.
On the flip side, there’s no set time limit for using the cash. So you can let it grow for the future in a health savings account more so because this is a tax-advantaged account.
You’ll enjoy a triple tax break:
- Your money grows tax-deferred.
- Your contributions are tax-deductible.
- You can use the cash tax-free for eligible expenses at any time.
3. Leverage a Roth IRA to Build Tax-Free Savings
You don’t have to be a full-time employee to save for retirement. People of all ages earning some money from working — even Gen Zers with summer or part-time jobs — can contribute to a Roth IRA.
A Roth IRA allows you to contribute up to the amount you’ve generated from your job for the year, with the maximum being $6,000 in 2022.
While a Roth IRA doesn’t give a tax break, you can withdraw your savings tax-free after age 59 ½.
4. Decide Between the Tax Advantages of a Roth 401 (k) vs. Traditional 401 (k)
Your employer may allow you to choose between traditional and Roth 401 (k) contributions.
With traditional 401 (k), your contributions are taxed when withdrawing. On the other hand, a Roth 401 (k) doesn’t give a tax break. However, you can withdraw your contribution tax-free upon retirement.
If you’re in a low tax bracket currently — most people are when stating — you can forego your tax break and withdraw your money tax-free in the future when your tax bracket is probably higher.
Inversely, if you’re on a tight budget, you can get a tax break now to enable you to contribute more money to your traditional 401 (k).
5. Save and Get Free Money with a 401 (k)
Saving some of your earnings in a 401 (k) should be one of your top priorities when you get into full-time employment.
A 401 (k) is an easy start since your savings are deducted automatically from your paycheck before you can spend the money.
You can contribute up to $20,500 to your 401 (k) in 2022. Still, even smaller contributions can make a massive difference in the future.
And, if your employer can match your contribution, it would be a good idea to invest enough to get the full employer match — that’s free money.
Employers match up to four percent of your pay, either 50 cents for every dollar you contribute or dollar-for-dollar.
The Bottom Line
To every Gen Zer, start saving now, however little.
Indeed, when earning your first paychecks, it can be challenging to set some cash aside for a distant goal such as saving for retirement.
However, if you can figure out how to fit some savings into your budget, you can go a long way in securing your future.
Start small, think big — that’s the easiest, most logical way to look at it.
You may also like: Choosing the Best Type of Investment While Preparing for Retirement
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