What is the Right Time to Start Retirement Planning?
A commonly asked question when it comes to retirement is, “When is the right time for me to start planning for my retirement?” If you’ve only recently started climbing the career ladder, you may be thinking that you’ll still have a lot of time before you need to start preparing. However, if it’s one thing financial experts agree on, retirement planning should always start sooner rather than later.
The concept of saving for retirement can seem virtually impossible when you’re still in your 20s because you may have just recently started a career and not be earning a decent wage yet – or you may still be struggling to repay student loan debt and think you don’t have enough cash left over to still invest for retirement. Alternatively, you may have other goals at this time of your life, such as starting a family – causing you to push retirement planning further away than you should.
Below are just a few benefits you’d be able to enjoy if you start saving towards retirement in your 20s:
Take Advantage of Compounding Interest
Every year, your money will earn interest in two ways – on the money you’ve saved and on any interest earnings that you received in previous years. This means that the earlier you start saving, longer you’ll be able to take advantage of two forms of interest being earned towards retirement.
Enjoy Tax Savings
By placing your retirement funds into an IRA or Roth account, you’ll be able to take advantage of tax deduction of up to $5,500 for each year that you make these contributions.
You won’t have to Catch Up on Contributions at a Later Stage
Individuals who don’t make any contributions towards retirement savings during their 20s and 30s usually only realize how far behind they’ve fallen when they reach their 40s or 50s. By the time this happens, they will have to contribute a far higher portion of their earnings each month to ensure that they’ll actually have enough to live on when they’re no longer working.
Develop Healthy Savings Habits
If you make it a priority as early on as possible to start saving for retirement – and any other emergencies that may arise from time to time – you’ll develop good spending habits that will help prevent you from needing to borrow money if times get difficult.
The Case for Starting to Save Later in Life
If you’ve waited until your late 40s or even 50s to start thinking about saving for retirement, you may be thinking that it’s too late to do anything about it. However, there are several reasons to get started, even if you intend to retire in the next five to 10 years.
- Most individuals reach their highest earning potential at this time of their lives
- Several employer 401 (k) plans allow employees over 50 to contribute more money than younger employees
In short, it’s never too late to start saving towards retirement. If you would like to find out how to get started, contact us today to schedule an appointment with one of our financial advisors.