Why Early is Better Retirement Planning Why Early is Better Retirement Planning: When it comes to planning for your retirement, one thing is certain:
Why Early is Better Retirement Planning
Why Early is Better Retirement Planning: When it comes to planning for your retirement, one thing is certain: it’s never too early to start saving.
But why is that? The short answer is that delay in this case will actually cost you money.
So, even if you start small, it is better than not starting at all.
Here are the top 5 reasons why you should start planning for retirement as soon as possible.
1. Compound interest
Early in your career, retirement seems so far away that you can hardly imagine it. You may think that you are still young and have a lot of time. At this point, saving for retirement may seem like you’re wasting your money.
However, there are many benefits to building good savings habits right away. One of them is compound interest – the interest earned on your initial savings and reinvested income.
If you’re not familiar with this concept, it actually means that an amount of money grows exponentially and automatically over time because of interest.
Here’s an example to understand the basics: If you invested $1,000 in a mutual fund and the fund generated a 7% return for the year, you’d earn $70 and your investment would be worth $1070. If you get a 7% return next year, your investment will be $1,144.9.
The initial money can actually add up to your retirement account with an average return of 7% for 30 years and your $1000 invested will grow to $7600.
So, compound interest can help you earn more than you initially did, especially if you have enough time to work its magic over years or decades. This way, you will find it much easier to meet your long-term savings and investment goals.
2. Fewer liabilities
If you talk to anyone nearing retirement they will tell you that the years have flown by. They may have some regrets that they didn’t start building their nest eggs earlier in life.
It’s much easier to plan for your retirement when you’re young and still have fewer responsibilities. As you get older, you’ll likely incur other expenses, such as saving for your child’s college fund or mortgage.
So, even if you are not earning much at the beginning of your career, you have time, and when it comes to saving, time is your friend.
3. You will acquire better financial habits
Saving is wise – The sooner you learn to save, the better your financial decisions will be over the course of your lifetime.
Saving money is a great habit, but it’s hard to learn after a lifetime of neglect. Even if you set aside some money, you will learn to use your resources for financial planning and reduce extravagance, which will pay off big over time.
Habits like saving and financial planning can make the difference between debt and financial freedom. Adopting these habits at an early age will strengthen your financial position.
4. Less stress
Planning for your retirement is an important step in your overall financial well-being, which benefits your overall health – your physical and emotional health as well.
Financial stress can be associated with many health-related conditions such as diabetes, heart disease, migraine headaches and poor sleep. Money worries can also lead to mental health problems, such as anxiety and depression, and lead to unhealthy behaviors, robbing you of the peace of mind to enjoy your life.
5. You can minimize mistakes
Comprehensive planning can be valuable when you know your family’s goals and aspirations. With less time to plan and save, you need to be very precise in your decisions, as one mistake can destroy your entire savings plan. When you start planning your retirement early, you’ll have more time to learn and find a strategy that works well for you. No one wants to lose the money they have saved; However, you’ll give yourself more margin for error.