Many people ask when they should start saving for retirement, and the simple answer is: When you get a job. It is absolutely never too early to start putting away a little at a time.
Whenever you start saving, be sure to avoid withdrawals unless absolutely necessary. You can choose to self-fund your retirement or you can contribute to your employer’s retirement plan. Research investment options and choose the one that makes the most sense for your situation.
Simply put, if you are preparing for retirement, you cannot forget to factor inflation into the mix. Inflation is the rise of prices for goods and services over time. Therefore, you can save $100,000 and inflation will not affect the amount you have saved; however, it will affect your purchasing power—meaning the amount you can buy with that amount of money. Inflation can deplete your budget and saving accounts fast. Speak with a financial advisor to see how much inflation you should add to your plan.
While no one hopes to have a medical emergency late in life, it is best to prepare for the what-ifs. Even with health insurance, there may still be a need to pay out of pocket. Saving in advance can help you prepare for these possibilities without the added stress.
Unplanned early retirement
There are many reasons why someone would retire unexpectedly; including career layoffs, failed businesses, and disabilities. Since life is full of unknowns, saving for retirement early can help you to avoid a personal finance crisis late in life.
Maybe you started planning for retirement and make some investments that you thought would pay out in the long term. Perhaps you put most of your money into investing in a company or property that did not yield the ROI (return-on-investment) that you anticipated. This is why it is important to not only start saving early on, but also to make sure you have a well balanced investment portfolio.
Earn higher dividends
Preparing for retirement early can lead to higher dividends, or interest, accrued over time. Make your money work for you by speaking with an investment advisor to see what investment accounts work for you. If you start saving early, you could double the amount you have at the time of retirement.
What are you doing to prepare for retirement? Do you think retirement will look differently in the next 20 years? Let us know your thoughts.