Why You Should Start Retirement Planning Today
Retirement may seem like a distant dream, but it’s never too early to start planning for it. Whether you’re just starting your career or nearing retirement age, taking action now can make a big difference in your financial future. Here are some of the top reasons why you should start retirement planning now.
The Power of Compound Interest
One of the most significant benefits of starting retirement planning early is the power of compound interest. Compound interest is the interest you earn on both your initial investment and the interest it generates over time. The longer your money stays invested, the more time it has to grow, and the more compound interest you’ll earn.
For example, if you start investing $500 a month at age 25 and earn an average annual return of 7%, you’ll have over $1 million saved by age 65. However, if you wait until age 35 to start investing the same amount, you’ll only have around $430,000 saved by age 65. That’s a big difference!
Future Social Security Benefits Are Unpredictable
Social Security benefits are a significant source of income for many retirees, but they’re not always predictable. The amount you receive in Social Security benefits depends on several factors, including your work history and the age at which you start receiving benefits.
While Social Security is projected to be solvent until at least 2035, after that, benefits may be reduced. Starting to plan for retirement now can help you create a savings plan that takes into account the potential unpredictability of Social Security benefits.
Life Expectancy Is Increasing
People are living longer than ever before, which means that retirement savings need to last longer as well. According to the Social Security Administration, a man reaching age 65 today can expect to live until age 84, while a woman can expect to live until age 86. That’s a long time to be retired!
Starting to plan for retirement early can help you create a savings plan that takes into account your expected lifespan and ensures that your retirement savings will last as long as you do.
Unexpected Expenses Can Happen
No one can predict the future, and unexpected expenses can happen at any time. Whether it’s a medical emergency or a sudden job loss, unexpected expenses can quickly drain your retirement savings if you’re not prepared.