‘I make 21 an hour and want to retire early’: How can I start a 401(k) and ensure I have enough left for school and debts?

Hi Money Minder,

Wow, I’m so excited to have a decent paying part-time job at my age! I currently make $21 an hour (hopefully bumping up to $22 soon after my performance review this month). I really want to retire early and someone mentioned starting a 401k is a great way to go about it. I have no clue where to begin with this stuff – all I know is I need to pay for car insurance and have a credit card debt to tackle. I still want to have a good amount left for school and other debts. What should I ask for?

Thanks for your help, Money Minder!

Cheers,
Future Financial Guru

Response from THE MONEY MINDER:

Hello There,

Congratulations on landing a decent paying part-time job and taking the initiative to plan for your retirement at such a young age! It’s great to hear that you are considering starting your 401k to build a strong financial foundation for your future. Given your current financial responsibilities, such as car insurance and credit card debt, it’s important to strike a balance between saving for retirement and managing your immediate financial needs.

In this situation, a practical approach would be to start by contributing a percentage of your income to your 401k that allows you to still have a substantial amount left for your school expenses and debt repayment. You may want to consider starting with a contribution rate that is manageable for you, such as 5-10% of your paycheck, and gradually increasing it over time as your income grows or once you have paid off your credit card debt.

Additionally, it’s a good idea to meet with a financial advisor or HR representative who can provide you with more information about your 401k options and help you make an informed decision based on your individual financial goals and circumstances. They can also assist you in understanding the impact of your contributions on your take-home pay and how to balance saving for retirement with meeting your immediate financial obligations.

Remember, starting early with your retirement savings is a smart move, and with thoughtful planning and guidance, you can set yourself up for a secure financial future. All the best from THE MONEY MINDER as you navigate this important financial decision and work towards achieving your retirement goals!