When you grow old, what do you plan to do? Your golden years may not be as golden as you want it to be if you have not saved up for it. Most of us go through our earlier years without a care for the future; “YOLO” as some would say.
But with increasing prices and changes to various industries and markets, the certainty of a comfortable life when you reach your later years becomes unsure. That is why it is important to save up for those rainy days. Below are a few reasons why you should save up for retirement at an early age.
You can retire comfortably.
Saving up for your retirement means that you get to live the life you want when you retire. Whether it’s buying expensive things, travelling around the world, or spoiling your children or your grandchildren with experiences, these can all be achieved if you save up as early as possible.
A lot of financial institutions now offer retirement plans even to young adults. This is because they recognize the value of compounding, which can be a great asset to someone who doesn’t earn a lot. Compound interest means that you earn more money if you invest early.
This means that someone who invests $100 a month at the age of 25 will still have more interest earned than someone who invests $1000 a month at the age of 30.
You can retire at an early age.
If you play your cards right, you could end up retiring before you reach the age of 66 or 67. The sooner you start saving up for retirement, the sooner you can retire.
Where you put your savings is also important to maximize your saving power. Employer sponsored 401(k) or 403(b) plans allows you to save more money since your employer will match (up to a certain point) what you contribute to your 401(k) or 403(b) plan. But this does not mean that you should only save what your employer can match; it’s always better to save more.
You don’t have to rely on Social Security.
While it’s good that you can always rely on the government to provide you with welfare during your golden years, ask yourself: do you really want that to be your only option when you retire? While taking advantage of Social Security is your right as a taxpayer, you may want to consider that it may not give you the quality of life you want when you retire.
There are many channels that you can take advantage of that can give you a more stable income when you retire. A Roth IRA for example is a savings option that will maximize tax benefits for you when you take advantage of it as a savings option. You may also consider looking into companies that offer annuity for when you retire.
While it’s important to enjoy the present, there is some wisdom to be had in preparing for the future. These three things are just the tip of the iceberg on why it’s important to start saving up as early as possible so that when you retire, you can continue living the life you want without having to worry about not meeting your basic needs.