Retirement planning has always been a process that we will have to face at some point in time. Even more so now with the fluctuating future of Social Security and other pensions and government plans. With these changes, it is important that the retirement planning process is started as early as possible. That way you can be prepared for any changes that are to come in the future that could affect your retirement. Working with a financial advisor can be a huge benefit as they can teach you aspects of the planning process you may not have thought of. Advisors can also help you put together a solid retirement plan that will ensure that you have a stress free retirement. If you are still unsure about retirement planning, below are four advantages of planning for your retirement.
Taking Advantage of Compounding Interest
As mentioned above, the earlier you begin planning and saving for retirement, the more you can reap the benefits of compounding interest. This interested is interest calculated on the initial principal plus on the accumulated interest of previous periods. For example, if you invest $5,000 per year, assuming a seven percent interest, from the ages of 25 to 65, you could grow that sum potentially to over a million dollars with the help of compound interest.
Enjoy Tax Benefits
In many cases, retirement plans offer tax benefits that many people are unaware of. When planning for your retirement, you can have a Roth IRA or a Roth 401(k), be sure to ask your advisor about these. With these types, you will not have to pay taxes when the money is disbursed. While traditional IRA’s offer immediate tax benefits, you will have to pay taxes when you take out the money in retirement. A Roth IRA offers you tax benefits later, giving you tax-free retirement savings. Tax planning is a major part of your retirement plans so be sure to discuss this with your retirement advisor.
Enjoy Independence During Your “Golden Years”
You have worked you’re entire life for your retirement, it is time to sit back, relax, and enjoy what the world has to offer and do things you want to do. In order to enjoy our golden years you will need to plan for your retirement and start saving early if you want to have the funds possible to enjoy or retirement. If you speak to those who have or have not saved properly for retirement will provide you with different stories. For those that saved, you will hear that they have more independence, can afford home care or short-term assisted living if needed. These folks also have money to travel and pay for unexpected costs by planning ahead. Those who did not do not have access to these funds and may not be able to pay for everything that is to come in their retirement. Planning for your retirement is something to highly consider as it can alleviate stress during retirement and prevent reliance on family or government assistance.
The main theme in this article is that you should consider retiring as soon as possible. Along with all the benefits of planning ahead, the biggest of them all is that you will get to retire sooner than you expected. The ideal age range to start saving is in your twenties but you can still create a comfortable retirement fund when you begin saving in your 30’s, 40’s, or beyond. If you work with a financial or retirement advisor, they can help you better understand the benefits of retirement planning and how you can reach your goals. No matter what age you are when you begin your savings, your advisor will help make sure you have a solid plan of action.