For a young people entering the workforce, planning for your retirement may not seem like one of the most appealing or even necessary tasks on the to-do list. But for anyone who is near the retirement age or already retired will tell you, it’s never too early to start planning for your retirement.
If you’re bringing home income, the reality is that you need to start saving for retirement as soon as possible. Delaying the start of your pension could put a huge dent in your retirement fund.
A lot of young people have other pressing needs to pay for in life such as education costs, mortgages or even starting a business – all of which can get in the way, therefore, making many people reluctant to save money which may not be touched until they’re 65. But what you may not realise, is that there are very important advantages to planning and saving for your retirement now. Below we explain why.
Staying in good health and controlling your stress is just as important as having enough money throughout your retirement. Sit down, have a think about your health assets. They’re just as important as having a comfortable retirement fund. So by saving over the years, you’ll be able to spend your retirement doing the things you enjoy and you won’t have to worry about expensive funeral costs for those you leave behind because your retirement savings can help towards this. It’s well worth mentioning that there are services in place such as Beyond who can help your family through the process.
Part of developing financial responsibility is all about learning to balance your future monetary needs with present expenses – for example, buying a new car and saving for retirement at the same time. Once you’ve become used to balancing out your priorities, it gets that little bit easier to build a budget. Establishing good money habits, like putting away funds when in your 20s, will give you major advantages in your retirement.
Although there’s a good chance you have student loans, you have fewer financial responsibilities in your 20s than someone who is older and married with children. This means you have more time to free up those extra pennies.
If your employer offers a workplace retirement plan, you may find that contributing a percentage of your salary will make saving for retirement a lot easier on your budget. These contributions are made on a pre-tax basis, meaning you are able to lower your taxable income while building retirement funds for your future. You are not required to pay any taxes on the expansion of your retirement fund until you take withdrawals.
It is likely that you have 40 plus years ahead of you at work so if you don’t have access to a retirement plan, consider getting an ISA and contributing as much as you want each year.
At the end of the day, planning for your retirement in advance is another way of taking good care of yourself. Just remember it’s never too early to start saving for that dream retirement.