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How New College Graduates Can Prepare For Retirement

As you cross the stage with your diploma this spring, retirement is likely the last thing on your mind. However, now is exactly the right time to start your long-term financial planning. You have your whole career ahead of you, and you want to keep your goals in mind from the start.

Preparing for your financial future can seem overwhelming, but it doesn’t have to be. This step-by-step guide will help you prepare for retirement and start your career off on the right foot. 

Start Saving for Retirement

The first step to prepare for retirement is to start saving. As with most savings goals, the sooner you start, the better off you’ll be down the line. There are a few ways to begin putting away money for retirement. 

Once you secure your first job out of college, check if your employer offers a 401(k). Some employers will even offer a 401(k) match. When you open this type of retirement account, a small portion of your paycheck will go into it each month as investments. The investments will grow over time, helping you save what you need to retire. 

An individual retirement account (IRA) is another great option for new college grads. You might open an IRA if you don’t yet qualify for your employer’s 401(k) plan, are jumping into self-employment, or won’t be working right away. 

There are several types of IRA accounts available, but most financial pros recommend Roth IRAs for new graduates. While your Roth IRA contributions won’t be tax deductible now, you’ll be able to withdraw funds tax-free once you reach retirement age. 

Make a Debt Payoff Plan

When it comes to financial security, today’s college graduates are facing a significant obstacle: student debt. If you’re graduating with student loans, you want to make a plan to pay it off as soon as possible. 

You’ll have a six-month deferment period on federal student loans after you graduate. This gives you time to start making a steady income. But once your paychecks start hitting your account, decide how much you’re able to pay toward your debt. 

Some borrowers will qualify for income-based payment plans, so it’s worth applying through your lender. However, try to make large payments as often as possible to get ahead of the interest. This will likely involve slashing other parts of your budget to make debt payoff a priority. 

Check out our Student Loan Calculator to accelerate your payoff!

Start an Emergency Fund

Your retirement account shouldn’t be your only source of savings. Planning for the future also means starting an emergency fund. Financial advisors typically recommend having three to six months of living expenses in a savings account (preferably high yield). This provides a cushion, so you’re always prepared for the unexpected. 

What might an emergency fund cover? Events like losing your job, needing car or house repairs, or experiencing a health emergency can cause serious financial strain. But your emergency fund will cover these expenses and help you avoid debt. 

Plan for Your Goals

As you start your career, it’s smart to start thinking about your long-term goals as well. Do you want to buy a home? Start a family? Take a year off to travel? These types of goals require years of planning and saving. Make a list of your goals and the steps you need to take to get there. 

Remember, your long-term savings goals will need to fit in with, not replace, your retirement savings goals. Be sure to fit both of these savings plans into your budget. Automating your savings is a great way to pay yourself first. Once you allocate money for your retirement, emergency fund, savings goals, and living expenses, you can spend on non-essentials. 

Check Your Spending Habits

After graduating college and starting your first job, the sudden boost in income can take time to get used to. Unfortunately, some new grads mismanage their paychecks and let their savings goals slip. If you’re tight on money, your retirement savings might come last. This is why it’s important to get your spending habits in check. 

As a first step, consider downloading a budgeting app that tracks your spending. You’ll likely be surprised to see where your money goes. You can then use the app to identify areas to cut back and create a realistic budget. 

While it can be tempting to be frivolous now and save later, you need to keep your retirement in mind. Living below your means, paying off debt, and meeting your savings goals will be much more rewarding later on. Plus, these mindful spending habits will stick with you for life. 

Meet With a Financial Advisor

The months following college graduation can be overwhelming. You’re looking for a job, choosing where to live, and making sure you start off on the right foot. A financial advisor will guide you through this life phase–and all of the life transitions to come. 

A financial advisor can help you set goals, tackle your debt, and pave your path toward financial freedom. You’ll have the tools you need to manage your money from a young age. And this knowledge will set you up for a secure retirement. 

The team at Second Opinion Partners is available to offer guidance to new college graduates and their families. Through financial education, holistic planning, and more, we’re committed to helping our clients manage their money through all of life’s changes. From divorce to retirement, we help you make the best decisions for your future self. Contact us today to schedule an appointment with one of our partners. 




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