Retirement planning: 5 moves you should make in your 20s

You’re 25 and everyone seems to be talking about retirement – which feels like eons away.

You’ve already taken the recommended steps to start saving early. You make regular contributions to your employer-sponsored 401(k) plan, and they’re big enough to get the company’s generous match.

Given that most Americans feel they need to catch up on their retirement savings, you’re ahead of the game. But is there anything else you can do to secure your financial future?

Here are five strategies 20-somethings can use now to help guarantee a comfortable adult life and retirement.

Tip 1: Don’t get ahead of yourself.

It’s awesome you’re thinking about retirement at your age. But don’t sacrifice short-term financial security for your long-term plans, says Douglas A. Boneparth, president of Bone Fide Wealth, a financial planning firm.

Young people should first “earn the right to invest,” he says. That means you must get a steady job with a consistent income first. Next up is funding your emergency savings in case life happens, which it will.

SEATTLE, WASHINGTON: Don't ignore other financial priorities like having a steady job and saving for emergencies to focus on retirement. REUTERS/David Ryder

This may seem counterintuitive, especially in a booming economy, but Boneparth says during trying times, a stable job and back-up savings will make all the difference.

“If you keep your job and the S&P goes down 30%, it’s a generational buying opportunity,” he says. “But it really hinges on if you [have] money [to invest].”

Tip 2: Increase your contributions gradually.

Guess what? There’s still more you can do with your company’s 401(k) plan than signing up and getting the company match. The Internal Revenue Services allow you to contribute up to $19,000 this year. These limits often increase from year to year.

While maxing out a 401(k) account may not be feasible for everyone – only 18% of millennials consistently maxed out their retirement – start off small and work your way up, says Erin Lowry, author of “Broke Millennial: Stop Scraping By and Get Your Financial Life Together.”

“If [your] employer will match at 5% and you have 10% going into your 401(k), every six months push it up by 1%,” Lowry says. “If you keep pushing it up 1%, you can slowly push yourself” to the maximum.

Tip 3: Try a robo-advisor.

When she first tried investing, Jessica Moorhouse, host of the Mo’ Money Podcast, made the mistake of investing in high-cost mutual funds. She doesn’t regret it, though, because she eventually found robo-advisors that simplify investing.

First-time investors should consider these advisors, such as Betterment and Wealthfront, both of which offer Roth IRAs – tax-advantaged savings accounts funded by after-tax dollars. The robo-advisors pick portfolios tailored toward your savings goals, while keeping your taxes and fees at a minimum.

BROOKLINE, MA: At right, Lauren Bell, a Boston resident, attends Steven Taylor's The Basics of Investing: Level I class at Society of Grownups headquarters in Brookline, Massachusetts. (Photo: Ann Hermes/The Christian Science Monitor via Getty Images)

To make investing even more effortless, these platforms allow you to automatically transfer funds from your savings or checking account to your investing account each month. They don’t require a minimum balance, but may charge an annual fee. Betterment charges 0.25%.

However, don’t worry: Robo doesn’t mean solo.

“You can still talk to people on the phone,” Moorhouse says. “It’s an accessible and affordable way to start investing.”

Tip 4: You can invest on your own.

Don’t get intimidated. It’s actually easy to invest on your own as long as you stick to low-cost index funds, says Christopher Zappy, financial advisor at Morgan Stanley. Find one that tracks the returns of the broad-based Standard & Poor’s 500 index, which is made up of the stocks of the 500 largest U.S. companies.

“They’re very well diversified,” Zappy says.

The S&P 500’s track record is also great way for your money to grow. For instance, a 25-year-old who had invested $10,000 in the S&P 500 in 1980 would have made $760,000 by 2018 when they turned 63.

Fee-free trading also has become easier to find among major banks and online trading apps such as Robinhood, Zappy says. Fidelity recently joined the trend, announcing it would eliminate trading commissions for all investments from stocks to exchange-traded funds on its online platform.

NEW YORK: Don't panic and sell your investments when the stock market swoons. REUTERS/Brendan McDermid

Tip 5: Never panic.

During the 2009 recession, Moorhouse remembers how her parents’ friends watched their 401(k) balances plunge as stocks got battered. They panicked, she said, and cashed in the remainder of their investments before they could lose any more in value.

What she learned is her parents’ friends made a huge mistake. Market dips were normal and not the end of the world. In fact, market swoons are a valuable buying opportunity. If you buy when values are low, you stand to earn more when the stock market goes back up.

“If you don’t touch your investments, the S&P 500 historically has always gone up,” Moorhouse says. “Just don’t touch it and don’t freak out.”

Dhara is a writer for Yahoo Finance. Follow her on Twitter @dsinghx.

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