If you’re in your 20s, it’s likely you’re facing many financial responsibilities — college loans, rent, and car payments strain a paycheck that only goes so far. And, understandably so, it can be difficult to invest for retirement when you’re just starting out. But the younger you are when you begin, the more likely you are to achieve the goal of financial security later in life.

So do yourself a big favor, and start making financial moves now that will help maintain your peace of mind in the decades leading up to retirement. As part of that initiative, spend a few minutes reviewing the roles a Discover account — such as a Discover Individual Retirement Account CD — could play.

Time and Money

The word “compounding” describes what happens when you allow investment returns to accumulate, potentially boosting the value of your account and giving it the potential for even greater growth in the future. Because of compounding, the more you save when you’re young, the more you are likely to have when it’s time to retire.

When You Change Jobs

Younger workers are also likely to change jobs several times early in their careers. According to the U.S. Department of Labor, the average worker holds about 11 jobs between the ages of 18 and 441. And with those transitions comes the temptation to “cash out” of a former employer’s retirement plan by taking a cash distribution. However, that strategy could have negative long-term implications.

For example, cash distributions from a retirement plan are subject to a mandatory tax withholding of 20%, which your former employer must take from your account balance and pay to the IRS. Also, a 10% penalty may be imposed if you leave your employer before retirement age.

On top of that, “cashing out” any long-term investments from your former employer’s retirement plan account could leave you shortchanged when you need the money most during retirement. A better idea might be to leave the money in your former employer’s plan or transfer it to a new employer’s plan (depending on plan rules). You could also “roll over” the money into a tax-deferred Individual Retirement Account (IRA).

Regardless of the specific strategy you choose, keep in mind that planning for the future by maximizing retirement account contributions when you’re young is almost certainly more productive and less stressful than waiting until retirement is just around the corner.

Discover

In addition to offering IRA CDs to help you grow your retirement savings, Discover also offers an Online Savings Account to help you with your short-term savings goals and a full range of CDs to help you save for the future. Open an account online in minutes or call our 24-hour U.S.-based Customer Service at 1-800-347-7000.

The article and information provided herein are for informational purposes only and are not intended as a substitute for professional advice.

1Bureau of Labor Statistics of the U.S. Department of Labor, September 2010

Discover Bank, Member FDIC

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