When thinking about planning for retirement, a person may be wondering when the best time to start planning is. Knowing when to start planning for retirement is key to living comfortably during that exciting part of life.
There really isn’t a perfect time to start planning—it has more to do with individualization. Planning for retirement should start as soon as a person is realistically able to do so. For most Americans, this is usually around their early or mid-thirties—after going through life’s major milestones.
Why You Should Start Planning for Retirement ASAP
There are many benefits to planning for retirement early in life. Here are a few benefits a person can look forward to if they start saving for retirement early:
- Having a Large Safety Net: The earlier that a person starts saving, generally the more money they will have available once they retire. This can be a huge safety net after retirement. Additionally, a person may be able to borrow from whatever amount they have saved in their retirement fund—even before they get to retirement.
- Saving a Lot of Money: Planning for retirement early is a good way accumulate a large amount of money overtime. In fact, a head start of as little as five years, can mean hundreds-of-thousands more in your pocket.
- The Independence from Social Security: Unfortunately, it is hard to predict the amount of social security/social security benefits that will be available once you retire. This is because funding is greatly dependent on the economic state of the nation. The more people who need social security means that individual amounts may go down. In the worst-case scenario, there may not even be any funds left for everyone who needs it. And so, saving a large amount of money for yourself is very important.
- Contributions to Retirement are Tax Deductible: Often times when you invest in a retirement plan, there are tax deductions that can be used to get more money from your tax return.
- Make Your Money Work for You: When you invest in a retirement fund early, your money may be able to collect interest—and the sooner money is added to a fund, the more it may accumulate over time.
- Introduction to Investing: Investing can be an important financial skill to have—especially if you want to make money using your money. Getting a retirement fund started early can be the perfect introduction into the world of investing.
How Can I Start Planning for Retirement Early?
It may seem like an intimidating challenge to think about planning for retirement early. However, it doesn’t need to be super complicated. There are many simple and easy steps a person can take in order to start planning for retirement early. Here are a few steps that can be taken:
Contributing to a 401K
Many employers offer their employees the benefits of a 401k plan. This can be a very simple way to save—as funds can be directly taken out from a paycheck. In addition to this, many employers will often match an employee’s contribution to a retirement fund.
Opening an IRA Account
If a person does not have a 401k from their employer, they should consider opening an IRA account. This is a retirement account that earns compound interest. There are few different ways IRA accounts operate, and a person can individualize how the taxes and withdrawals work.
Consulting a Professional
Believe it or not, there are professionals that specialize in helping people with their retirement savings. These professionals will take a look at your income, ask about your retirement plans, and then come up with short and long term plans to make sure you get the most from retirement.
Planning Early Means Thinking About What You Want to Do After Retirement
When planning for retirement—or thinking about starting—it is important to think about the things that you want to do in your spare time once you retire. The only way a person can do the things they want during retirement is if they planned and budgeted early. Here are a few common activities that most people plan to do once they retire:
- Give out gifts to family/loved ones
- Pursue a hobby
- Invest in a business
- Buy multiple properties
- Improve a home
When it comes to retirement, there really isn’t a set time to start planning. Instead, a person should think about their financial goals and their current income; this way they could start planning for retirement as soon as possible. There are many benefits for starting a retirement plan early—and several ways to go about it. Having a good amount of money for retirement can make a huge difference in the quality of life one will live. To ensure you can afford to do everything you want with all that freedom, make sure you start saving early. This will ensure you have the right amount of finances to back you up when the time comes.