It is never too early to start saving towards your pension. Retirement is coming for everyone, and having that nest egg to rely on can give you peace of mind that you won’t be struggling and can enjoy your golden years as you deserve once you finish your working life.

That being said, you need to know How to save for retirement to make sure you are ready once the time comes.

401K

If your workplace offers a standard 401(k) plan and you are eligible, you may be able to contribute pre-tax. Assume you pay 12.5% tax and contribute $100 per pay period. Because that money is taken out of your paycheck before federal taxes, your take-home pay drops only by $88. (plus the amount of applicable state and local income tax and Social Security and Medicare tax). So you can invest more without affecting your monthly budget. Even if you quit that company, you have options with your 401(k).

Open an IRA

Consider opening an IRA to help build your nest egg. Depending on your income and if you or your spouse have an employer retirement plan, a Traditional IRA may be perfect for you. Investment profits can grow tax-deferred until withdrawals are made after retirement. A Roth IRA may be suitable for you if you meet the phase-out income limits based on your federal tax filing status. Because they are funded with after-tax dollars, qualifying distributions, including earnings, are tax-free after you reach retirement age.

Automate Savings

You have probably heard the phrase “pay yourself first.” This means automating your savings to come out of your wages as soon as they learn in your checking account. You try to follow the 50/30/20 ratio when it comes to savings, meaning that 20% of your income should go into your savings. If you never have access to this money, you don’t miss it as much, and you can create better habits when it comes to increasing your retirement funds.

Address Your Spending

Being able to budget effectively now will put you in a good position once your income levels change. It may be that you don’t have the same income levels to meet your daily needs, and you need to learn to live within your means later in life. Practicing this now and learning how to budget and control your impulse spending can help you manage your money come retirement, plus put you in a good position should you experience any financial changes before this.

Don’t Waste Extra Money

Received a bonus or some money unexpectedly? Don’t waste it. Increase your contribution percentage with each raise. At least half of the new funds should go to retirement. While it’s tempting to spend your tax refund or bonus on a new designer handbag or a vacation, ask yourself if this is the best use of the funds. It might be better used towards your future depending on the amount you receive.

In conclusion, planning for your retirement is something you can and should start sooner rather than later.