Retirement may be far away for most, but the reality is that when it comes to retirement planning, you can never start too early. There are tons of benefits to investing in retirement early, or better yet once you begin working. Building the money you’ll need for the lifestyle you want when you retire becomes more and more of a headache the longer you wait. Don't forget time is the golden key when you’re building up for your retirement savings. Here are a couple of things that you will need to account for when planning your retirement.
Compound interest is single-handedly the most beneficial part of investing early in retirement. although there’s no guaranteed set rate of return, when you start planning early for your retirement, you’ll end up with more funds with less capital investment than if you wait until later in your. Compound interest is the process of cash growth due to interest building upon itself over time.
EX. If you invest $10,000 in an account with a 5% yearly growth, that'll be $10,500 in a years time. The following year, another 5% on $10,500, which comes to $11,025 after only two years.
Waiting to save money later for retirement means you’ll have to set aside a more of your funds from your paycheck to have enough money for your ideal plan. Setting aside $50 per month versus $2,000 is a big difference in day-to-day expenses.
Does your employer have a sponsored retirement plan? Take advantage. Many employers will match your contributions up to about 5%, so if you’re utilizing the plan, you’re practically tossing away free money for retirement.
Access to higher risk, higher reward investments will give you access to a more diversified portfolio. Time is one your side when tap into higher risk, higher reward investments. Placing yourself in a high return potential investment opportunity can give you a more significant financial stability when you retire. Investing in your retirement early also increases the probability of successfully sail through market fluctuations .
Social Security benefits, in the United States, the increased longevity of an aging population means that millions people once they come of age they will continue to turn to Social Security benefits. Longer life expectancies on average are increasing, people are living much longer. Increased life expectancy means that you’ll likely need more money to retire to care for yourself for a longer period of time. Social Security will then be paying out more than what come in, which in-turn negatively effects the long-term use of Social Security. Many Americans turn to Social Security benefits in their retirement plan. Considering the future of Social Security, it is necessary to plan for the possibility that Social Security funds will not be an option that will be available. Moreover, as time goes on, healthcare costs will likely increase due to age. Your going to need funds for out-of-pocket expenses. With the cost of healthcare increasing every year, you need to be getting ready to plan your retirement.
Inflation, Yes we have been hearing this a lot as of late and we need to realize it also impacts the ability to retire comfortably. If you start saving for retirement earlier in your career this increases the chances of your retirement savings being able to keep up with inflation.
To confirm that you’re taking the correct action toward reaching your retirement goals, it’s best to discuss a portfolio with an professional financial advisor who can help you with a plan that mirrors your current vision of financial long-term goals.
Connect with a retirement team today to learn more about your options.
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