I am at the point now where I am about to hit another milestone in my life. I am about to graduate college (again) and find a big girl job. After going through countless interviews with companies discussing benefits and salaries, one important thing always comes up, retirement. I have yet to even begin my career and I now have to think about retirement (yikes!). It gets quite overwhelming every time I research these business deals… I mean, retirement plans. While paying into retirement is always a good investment, it is definitely a gamble. Before I begin paying in to my retirement for 20 to 30 years there are some things that I, and every recent college grad should be working on.
It is not a question of if; but when there is a rainy day. Losing your job, unplanned medical bills, etc.…and the list could go on. As we all know, during a rainy day the price of an umbrella skyrockets. Well, one thing you should know is that your retirement plan should not be considered a backup for when times get hard. You will get all kinds of fees and taxes for taking money out of your fund early. So be prepared for the storm by saving beforehand. You should save at least 6-10 months of bills before paying in to your retirement.
Paying Down Debt
You should prioritize paying down debt before paying in to your retirement plan. Although retirement plans are a great way to bigger assets, the interest on your debt will be tearing away at those assets. These loaners also do not play about getting their money back and you definitely do not want to have any delinquent payments on your credit history. The sooner you pay off the debts, the less interest you will have to pay. Therefore, taking three to four years to focus on significantly paying down your debt before your retirement would be more beneficial than paying off debt while paying into retirement.
Good Credit Score
Another priority that should be focused on before you pay into retirement is your credit score. While dedicating a couple years to pay off debt, use that same amount of time to simultaneously build your credit. Once your credit is built and you can focus on using your credit to buy long-term investments (a house) that will be paid off before you retire. Your credit can also help with those rainy days as you can use credit cards to help you get back on your feet.
While researching which retirement plan is best for me, I notice that there are no introductory special prices for retirement funds. This means that you are not really missing anything by taking a couple years to focus on your present self. Focusing on building a solid foundation now will be beneficial for you during and after the long road to retirement.