Money Management

Retirement may not be on your radar in your 20s. But read on to see why it should be. 

Being a 20-something isn’t always easy. At this stage of life, you may be facing a host of bills while only earning an entry-level salary. And you may be more focused on paying off your credit cards than socking money away for retirement savings purposes.

But the reality is that your 20s are an important time to start saving and investing for retirement. And if you push yourself to start funding your IRA or 401(k) plan in your 20s, you might end up in a great financial position once your 60s roll around.

Why starting early is key

A lot of people don’t really begin to prioritize their retirement savings until their 30s or 40s — or sometimes, even later. But you should know that the sooner you start investing your money for retirement, the more opportunity you’ll have to grow it.

Over the past 50 years, the stock market has rewarded long-term investors with an average annual 10% return before inflation, as measured by the S&P 500 index. So let’s say you start contributing $200 a month to your retirement plan at age 25 with the goal of retiring at age 65. If your portfolio delivers that same average annual 10% return, in 40 years, you’ll be sitting on about $1.062 million. A sum of money like that could make for a very comfortable retirement.

But watch what happens when you wait 10 years to start funding your retirement plan. At that point, if you only manage to save and invest $200 a month over 30 years at that same 10% return, you’ll be looking at a final balance of about $395,000. That’s a world of difference.

It’s also worth pointing out that saving $200 a month for those extra 10 years means parting with an additional $24,000. But in exchange, you’re looking at a gain in your IRA or 401(k) that’s $667,000 higher. When you think about it that way, it’s pretty easy to make the case to start saving for retirement in your 20s.

How to pull off retirement savings in your 20s

At this point, you may (hopefully) be convinced that starting to save for retirement in your 20s is a smart bet. But the question is, how do you pull that off on a minimal salary?

First, take a look at your expenses and see if there are any you can cut back on. The example above illustrates how far you can get with a $200 monthly contribution. So perhaps there are expenses you can slash to the tune of $200 a month. Skipping one restaurant meal a week might even do the trick, depending on your dining habits and how expensive restaurant food is where you live.

Another option, of course, is to turn to the gig economy for an income boost. If you’re able to side hustle your way into an extra $200 a month, that money can go straight into your retirement plan so you’re able to invest it from a young age.

Many people don’t save for retirement in their 20s. Rather, they wait until their incomes are higher and their financial lives are a bit more stable.

But if you miss out on the opportunity to start saving in your 20s, you might sorely regret it. So instead, think about the different things you can do to make modest but meaningful monthly contributions to your retirement plan.

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If you’re selling your home, there’s a crucial number you need to pay attention to. Read on to learn why a buyer’s deposit matters for you. 

When you are looking for someone to buy a home you’re selling, chances are good that there are a few things you’ll focus on when you receive an offer. Of course, you’ll probably take a good look at the sale price to see if it’s fair and if it provides you with enough money to pay off your mortgage loan. You may also consider the closing date to ensure it’s on your schedule, and will probably take a close look at what contingencies the buyers have put in the contract, such as an inspection or financing contingency.

There’s one number that’s often overlooked, though, and it is an important one. It’s the deposit that the potential buyers offer to put down on the property. This money will go in an escrow account until the transaction is completed, and it’s vital you look at it. Here’s why.

Your buyer’s deposit protects you

There’s a simple reason why you need to pay attention to the buyer’s deposit when they submit an offer to buy your house.

As soon as you accept an offer on your home, you must switch the status of the property to Pending on the Multiple Listing Service (MLS). This means any potential buyers will see it is no longer active, and most people will be unwilling to even go and take a look at it because they assume the current sale will go through.

You’ll essentially lose the chance to find other interested buyers once your home goes to pending. And that’s OK, as long as the buyers actually move forward with the purchase. It becomes a big problem if they don’t, though, both because you’ve lost time in the process of trying to sell and because having a property go to pending and then come back on the market can make future buyers concerned that there’s something wrong with the house that caused people to back out after they made an offer.

You don’t want to take the house off the market for someone who isn’t serious about buying it. Now, you’re likely going to have to accept some contingencies on the offer, such as a buyer making the sale conditional based on an appraisal and an inspection. But if those contingencies are satisfied, you don’t want the buyer to just be able to walk away from the deal and their pending mortgage loan because they changed their minds.

Their deposit is what stops that from happening.

Don’t leave yourself without recourse if the buyer doesn’t fulfill the deal

A deposit protects home sellers because if the buyers don’t follow through on the deal (for some reason other than not satisfying the contingencies), the buyer forfeits the money.

The larger the deposit the buyers put down, the less likely they will be to just walk away from the sale. If they hardly put anything down, they may be more inclined to just opt out of closing if they change their mind or some other house comes on the market in the meantime that they like a little better.

While you can sue a buyer who doesn’t follow through without justification, that’s a lot of hassle, and most people aren’t going to go through all that. So, a larger deposit is the best chance you have of deterring buyers from not keeping up their end of the bargain.

You’ll want to make sure the amount is large enough to serve as an effective deterrent to protect your interests. Usually, a few thousand dollars is enough, but if it’s a large transaction, you may want to hope for at least $10,000 to $20,000 at a minimum to make sure walking away would hurt.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
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