Should a 22 year old invest in retirement?

Question

I am just starting a new job next week and have to decide if I want to sign up for a 403b retirement plan. I will be making around 50k per year but also have just over 50k in student loans to repay. I'm wanting to pay back my loans within 5-6 years. Should I wait to invest in my retirement until the loans are paid off? Any pertinent advice would be apperciated. Thanks so much!

Answer 1

jsut some info. A 403b is a tax deferred annuity plan for people that work for non-profit organizations, like schools that file 501c of IRS tax code. in a 403b you can currently contribute up to $15,000 per year in 2006. A 403b plan is a retirement plan, you cannot touch that money until you are at least 59 1/2 without serious penalty. The tax deferral could be beneficial to you. the rule of thumb is $100 a month reduces your federal taxes by $25.

example: your income is $50,000, your tax bracket 28% = $36,000 take home after tax, 14000 in taxes
your income is $50,000, you put $5,000 in your 403b, your tax bracket 28% (could potentially fall but we will leave it as is) = $32,400.

give up $3600 now, to put $5,000 in the bank. your choice.

for more info go to 403bwise.com

Answer 2

The sooner you start a retirement investment plan the better. It is a good idea to pay off your loans so maybe a smaller savings plan initially, when your loans are paid off invest some or all of that portion of your pay in to your investment savings and you won't miss it from your cheque scince you were allready paying it out. Make any sense?

Answer 3

Start investing now... and there are many reasons for that.
Yes, I know you have a whack of money tied up in student loans that you'd like to get paid off AND you are starting a new, well paying job, but, you never know what the future holds.
For example, I was injured in a flying accident when I was in my mid 20s. Although I didn't know it at the time, I was injured worse than I had thought but it didn't come back to haunt me until I was in my mid 30s. I didn't start saving for retirement until I was in my mid 30s. By my late 30s, I found myself out of work due to my injury. I only had about 5 years of retirement monies of my own saved and, now at the age of 42, I have used ALL of it trying to survive and keep my head above water.
My point.... pay yourself first. Save what you can.. every week or bi-weekly from your paychecks.. have it deducted right off the top so you don't even see it. Even if it's only $20 a week... if that's all you can afford... it adds up. If you start now and, say, in your mid 50s something happens and you can't work for an extended period of time, you have that money to fall back on. It might only be a few months.. but what if you need that money for a few years? If you start saving now... you'll have it to use.
If nothing ever happens and at 60 you want to retire. or even 55, you'll have more money if you start now. than you would if you waited 5 to 10 years.
My recommendation is to start saving now for your retirement, even if it's only a small sum... it all adds up!
Congrats on the new job.. hope it works out

Answer 4

The best thing you could do for your self is tuck money away in a retirement account!! The earlier in life you start the more money you will get to play with when you're older. I understand that you would want to get your student loans down fast. See if you can make 2 payments a month if it's in your budget to. This will cut down the amount of years you will be paying it off and lessen the amount of interest.

Answer 5

It's never too early to start saving for retirement. A 403(b) plan is a good way to save because you don't pay taxes now on the money you contribute and your employer probably provides a matching amount on your contributions. Compare your after-tax cost plus the matching amount plus the earnings on your savings and unless the interest rate on your student loans is very high it probablu makes more financial sense in the long run to save the maximum amount your employer provides any match on before paying more than the minimum required on your student loans.

Answer 6

I'm only 14 but my parents taught me a bit about business. It's always good to plan ahead a couple years but you might want to wait another couple months. Just think where you might see yourself when you're old enough for retirement. Try to be a penny pincher for a little bit till you get those debts paid off then when you've saved up around 20-30k again invest in retirement.

Answer 7

You DEFINITELY want to start saving or eliminating debt. Either will work, but don't go blowing money. Thinking long-term, you must have money for retirement and you must pay off the loans. Interest rates are rising, but you also get certain breaks from student loans.

If you must have debt, you want it in either student loans or home mortgage--NOT CREDIT CARDS OR CAR LOANS!

Answer 8

do anything you can! Its better to save pretax but after tax is good too. Talk to an accountant. Im not sure if you can deduct student loan interest. You def can deduct retirement contributions. I contributed almost 20k this year already, id rather have it in the future than now!

Answer 9

Read the Dave Ramsey book "Total Money Makeover". You should definitely be looking at investing for retirement, but read the book and you will get it. Get out of debt, stay out and invest. His book "Financial Peace" is another great book. His story is a very interesting one.

Answer 10

contribute to it to the amount your employer matches....and pound down your existing debt....

Every single 40 yr old will tell you the same thing...."gee, If I had known what it would do for me, I would have started investing in retirements accounts at 18!"

Oh yeah.....if you have not consolidated your students loans....get it down before JULY 1...