Why Take Responsibility for Your Retirement Early?
Imagine you just turned 25 years old. If you were able to save just $250 per month in an investment account earning 5% APY, by the time you hit your 65th birthday, your savings would be over $370,000!
If you waited until you were 50 years old and plan to still retire at the age of 65, you’d have to save roughly $1,385 per month ($16,620 per year) to meet that same goal, assuming the same rate of 5% APY. That goal will be much harder to achieve, especially if you have children you’re trying to help with college expenses.
While it’s a lot easier to begin saving as a young adult, you could still enjoy the benefits of cumulative growth if you begin at 45 or even 55. Today is always the best day to begin saving or to add to your retirement fund.
Can You Rely Upon Social Security?
Some folks assume they don’t have to save money to provide retirement income because they can rely on Social Security. It is true that people pay into the Social Security system for their entire lives and should enjoy some returns from that investment. However, it’s unlikely that your plans for a comfortable retirement include living on such a limited income. And, unfortunately, many are worried today that Social Security may not be around in decades to come; rely on yourself and your savings – not others for your retirement.
Can You Count Upon a Pension?
You may look forward to collecting a pension from your employer. These days, pensions have become much rarer than they used to be. Many private and public pension plans have run into big trouble too. Many pension plans already face financial struggles, and many of these plans don’t expect current systems to survive the coming decade.
Even though pensions are not currently allowed to cut plans for people who have already retired, they can reduce income for those who haven’t. In addition, discussions have already started to change current rules and allow struggling pension funds to change retiree benefits after retirement.
Only You Can Guarantee Your Comfortable and Worry-Free Retirement
You might plan to spend your retirement years playing with your grandchildren, visiting foreign lands, or even turning one of your hobbies into a small business. At the same time, it’s impossible to predict how much basic needs like utilities, food, and medical care will cost or how much income from other parties that you can rely upon.
It is possible to say that few people ever regretted saving too much money for retirement. If you can get your money to start helping you as soon as possible, your retirement dreams can be easier to realize than you might imagine.
1. Consult with your tax advisor for further details about tax implications of IRA savings accounts.