Wealth Planning Starts by Saving Early For Retirement
An alarming one in three Americans have nothing saved for retirement. Over 50 percent of Americans have less than $10,000 saved for retirement. These individuals evidently plan on working throughout their, traditionally, Retirement Years. Odds are that they will not be able to survive alone on Social Security payments. If you want to avoid being in this position later in life, start the wealth planning process by saving and investing for retirement now. The true reality is that saving early for retirement is a must. There are some significant benefits to beginning the retirement planning process as soon as possible after you begin working.
More Money Invested for Retirement Means More Money for Retirement (duh)
The most fundamental and seemingly obvious reason why saving early for retirement matters is the very simple reality that more money investment early in life, means more money for retirement. Despite this simple reality, a myriad of reasons and excuses exist that cause a majority of people to forgo saving for retirement early.
Understanding the profound impact of investing for retirement early does understandably spur some people to act. The impact of compounding returns on a retirement account is significant.
An individual who invests $5,000 in a retirement account with a 7 percent return between the ages of 25 and 35 will have $602,070 at the age of 65. A person who invests the same amount between the ages of 35 and 65 will end up with $540,741 by the age of 65. If a person invests $5,000 annually between the ages of 25 and 65, he or she will have over $1 million in his or her retirement account by the age of 65.
Better Edge Against Economic Uncertainty
The truly devastating economic downturn that began in 2008 should remind people of the reality that the economy can take a negative turn and do so with sometimes very little warning. Starting to invest for retirement early in life provides a hedge against economic uncertainty and the reality that the economy can and will face downturns.
Retirement investing is not a short-term endeavor. By beginning to invest in retirement early, and with an eye to the long term, a person is better positioned to recover from those downturns in the market and the economy more generally.
People Live Longer and Need More Money for Retirement
People in the United States are living longer in this day and age. Indeed, the thought is that people will be living even longer still 30 years from now. With that in mind, a person retiring today will need to cover more years as a retired person than was the case a generation or two ago. The only real way to cover the complete retirement time period is to begin investing money into a retirement plan earlier in life.
Take Advantage of Different Investment Options During Wealth Planning
Really successful wealth planning, taking into account goals, risk tolerance and time, begins by investing in a retirement plan early in your adult life. You really have the ability to take advantage of different investment options, subject to your tolerance for risk. As you get older and closer to retirement, the focus will (usually) shift to more conservative investments with less (volatility) risk. When you’re younger, you can invest at least some retirement-designated money into a bit riskier options that have a higher rate of return. Invested well, such an investment pays off over time, giving you a better leg up on getting ready for your Retirement Years. Even if a riskier investment doesn’t play out as you hoped, but because you started investing earlier in life, you have the time to absorb any issue with a lower than anticipated return on such an investment.
Truly Enjoy Retirement
As was already noted, many people now seem to have a retirement plan that involves continuing to work or somehow trying to manage to survive on Social Security. The operative words here are “trying to survive.” Absent a decent amount of money set aside in a retirement account a person is not at all likely to be able to truly enjoy his or her Retirement Years. If not spending a great deal of time working, an individual who lacks a suitable amount of money in a retirement account simply will not be able to enjoy those things he or she likely had dreamed of doing while retired.
Ideally, a person reading this article has already started the wealth planning process by starting to save for retirement. In a perfect world, a reader started saving in his or her 20s. That being said, if you’re a person who’s not been serious about putting money away for retirement, or if you’ve not started to save for retirement at all, start now. It’s never too late to start saving for retirement, with the caveat that the benefits you can realize from retirement diminish as the years roll by.