The Essence Of Saving For Your Retirement Early

If you still have some decades before you retire, you may not consider saving retirement money as a priority because retirement may seem so far away. It’s good to focus on your immediate goals like buying a new car, going for a vacation, and moving into a new apartment. However, saving for retirement can help you live your life to the fullest after departing from the workforce. Retirement living in Florida can be great if you have money to finance your lavish lifestyle and medical needs. 

According to some studies, you need around 70% of what you make at the height of your career to maintain your living standard in retirement. However, this percentage may increase if major unexpected life events like medical needs, changing family dynamics, and long-term care crop up. Therefore, to live a good life, you need to save.

Here’s why you need to save for your retirement early:

1. Not Every Employer Offers Pensions And Contributes Towards Your Retirement Savings

The disappearance of traditional pension plans from the job market has made retirement more challenging than before. According to research by the Retirement Research Department of Boston College, 88% of private-sector workers had a pension and workplace retirement plan some few years ago. There are currently only 33% pension plans, and most of them are struggling with inadequate funding. 

The responsibility of saving for retirement has moved from the employer to the employee in the past few decades. Most employees choose to reduce their liabilities by giving a defined contribution retirement plan instead of pensions. If your employer has a pension plan for you, you can use your retirement benefits wisely as useful saving tools. Because some sponsored pension plans can be prone to market and investment risks, you need to start contributing early to benefit from compounding.

2. Lifespans Are Increasing

If you live on earth for long and haven’t saved enough, you may face the possibility of outliving your assets. According to a study by the CDC’s National Center For Health Statistics, the life expectancy for most Americans born in 2018 is estimated at 79 years. This means that you may spend some significant time in retirement before you die. 

Living longer in a retirement home means you’ll have to pay more for health care during your lifetime. According to data released by the health view services, retirement healthcare expenses are expected to rise at a rate of about 5.5% annually. That means that a 55-year-old person who’ll retire in the next ten years may require upto 92% of his social security benefits to finance healthcare costs during retirement. 

3. To Practice Financial Discipline

You may be currently working towards accomplishing some financial goals like buying a home or starting a business. Though it’s good to prioritize immediate milestones, it’s also vital to save for retirement. Don’t worry about the amount to set aside. Instead, be worried that you haven’t started saving. If you make saving a habit, you’ll gain momentum, and soon you may begin building up your fund. To save effectively, save regularly, just like you pay your monthly credit card bills.

The Bottom-line

There are numerous reasons why you need to start saving for your retirement early. Fortunately, if you haven’t started, it isn’t too late to start now. A financial advisor can help you set a savings target and work with you towards accomplishing your goals.