For many, the question of when it makes sense to start retirement planning never occurs until it is rather on the late side. The thought of retiring seems so far away, that it doesn’t seem worth bothering about right now, especially with finances as they are, but unfortunately it makes sense to start your retirement savings plan while you are still in your twenties. If you can put away 10 per cent of your earnings every year, and keep it in your savings account, ie don’t dive into for any reason, then you should do ok for your retirement.
If you are unable to do this because of, for example student loan repayments, getting made redundant at work, or for any number of reasons, then you may find that by the time you reach 50, you need to put away a whopping 50% (yes, fifty per cent) of your income to have a chance at a reasonable retirement.
Now, all may be well, if you don’t expect to do much once you are retired, but if you have visions of spending your retirement visiting all those places you never got round to while you were young, or you want to take a six month cruise, or spending retirement in any number of expensive ways, then you’d better prepare for it, before it really is too late.
Social Security, or whatever it will be called by then will not fincne a high level of living during retirement, of that you can be certain.
This means that you should not be depending totally on social for all your retirement income. It just isn’t enough for the elderly now, and it won’t get any better in the future.
So, given that, when should you start your retirement planning? As early as possible is the answer. It can never be too early. Even if you only save $2,000 a year for eight years, and then never invest any more, this money will increase due to the compound interest, and will help more than if you started saving in your thirties.
It is best for your retirement plan if you can make monthly contributions, preferably deducted from your pay check at source, so it never gets to your bank account to tempt you! Get used to living on the amount in your checking account, and if it becomes too difficult, look at how you can cuts costs, or get an other job, but do not eat into your retirement fund if at all possible. If you do, before you know it your future income will be gone, and it will be much harder to save it plus the interest it would have made you in the future.
So, when does it make sense to start retirement planning? As soon as you possibly can once you have a job and can contribute regularly to your fund. But you might want to see a financial planner to get their advice – you don’t have to take it, but it can give you a choice of options for your retirement fund.
saving for your retirement
