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Is It Too Early for Gen Z to Start Considering Retirement?

Is it too early for Gen Z workers to begin to plan for retirement? The simple answer is no. It’s never too early to plan for retirement. While getting the exact details of when, where and how much you will need is years into the future for most Gen Z workers, any time is a good time to start preparing. Your early retirement contributions are some of your most important.

How to start? The first step is to get your personal balance sheet in good order. That means having more assets (investments, savings or equity) than debts (loans, mortgages, credit cards, etc.).

Determining Your Debt

Let’s start with debts. How much do you owe, to whom and at what cost? Create a spreadsheet and list all the people, banks or other institutions you owe money to. Include when payments are due as well as the interest rates you are paying on that borrowed money. Then you can focus first on paying down the debts with the highest interest rates. If you are not clear on what debts you owe, you can visit to request your free credit report from each of the three major credit bureaus. Your credit report shows the history of all your loans, credit cards and other debts.

Next, let’s look at savings. For long-term retirement savings, you have two main options: your employer-sponsored retirement plan (401(k), 403(b), 457) and an individual retirement account (IRA). Your contributions to any of these retirement accounts can be either to a Roth IRA/401(k) or a traditional IRA/401(k). We’ll discuss the difference between the two later in this article.

Using one of these vehicles for your retirement savings is typically your best bet. If your employer offers a 401(k) retirement plan with matching or profit sharing, you’ll want to take maximum advantage of your employer’s contributions. Matching contributions are a type of extra compensation from the company that can help you save for retirement.

Comparing Traditional IRA and Roth IRA

You have probably heard of a Roth IRA before but may not know how it differs from a traditional IRA. Both are used for the same purpose: retirement savings. When you place your money into an IRA, you can’t touch the money without penalty until you reach age 59 ½ (some exceptions may apply). The difference between the two IRA types is the time at which you pay taxes on the contributions. This is true for both IRA contributions and contributions to an employer retirement plan, such as a 401(k), 403(b) and 457.

In a Roth IRA or Roth 401(k), you are contributing after-tax dollars, so you let the account grow tax-free and do not pay taxes on the withdrawals. For this reason, it is more beneficial to you if you contribute to a Roth when your current marginal tax bracket is lower than you estimate it to be in retirement.

In a traditional IRA or traditional 401(k), you are contributing pre-tax dollars, so you let the account grow tax-deferred and pay taxes on the withdrawals. For this reason, it is more beneficial for you to contribute to an IRA when your current marginal tax rate is higher than you estimate it to be in retirement.

In either case, you do not need to pay taxes during the life of the account, making it more desirable than your typical savings account.

As far as retirement planning goes, the goal in your 20s and 30s is to have a positive balance sheet (i.e., more savings than debts). Then as you get closer to retirement age, you can focus on the finer details like exactly when, where and how much you will need.

Working with a CERTIFIED FINANCIAL PLANNER™ professional can help you start saving for retirement now. Visit to find a CFP® professional near you.

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Retirement Planning Starting Out