Is it Too Early to Start Saving for Retirement?

Wise people say that it’s never too early when you plan to do something brilliant. Same holds good in case of retirement planning. Its’ never too early to plan your retirement and make arrangements for the same. In fact it makes no sense waiting till you are old enough and approach your retirement age. In order to maintain the current standard of living it is vital to stay financially strong. For that it is important to start young. The sooner you start saving the larger is the nest-egg when you retire.

Youngsters are swiftly pushed into the real world after the completion of their education. The real world is way different from the bookish theory. Just being well informed about personal finance is insufficient to buy a wide-ranging nest egg. Implementing this knowledge efficiently in planning one’s finances is the key to long-term benefits. Developing sensible spending and saving habits will help smoothly overcome the uncertainties in life without having one running into financial troubles.

Here is an instance of why it is essential to start salting away money for retirement as early as possible. Jack and George, both 25 years of age, are friends. They graduated and landed a job at the same time. Jack started saving for his retirement as soon as he started getting paychecks. He set aside $5,000 per year to invest into an annuity with 8% rate of returns, and he plans to carry on until he reaches the age of 65 years. On the other hand, George turns 30 when he finally starts investing $5000 per year in an annuity with same the rate of returns. Forty years henceforth Jack will have a nest-egg of $1,295,282.59 when he retires. In case of George the nest-egg will be only $861,584.02 when he turns 65. The difference between the tenures of Jack’s and George’s annuity is 5 years, but its costs George a whopping $433,698.58. This is because of the compounding effect of the annuity year after year. Look at this infographics which shows only 18% people are confident to have sufficient funding for their retirement. You do not want to end up in the other bucket.

You can try to increase your contribution over a period of time till you attain the maximum contribution amount allowed under the 401(k), Roth 401(k) or any other plan where your money grows tax deferred. This may make a tiny difference in your paycheck now. But the compounding effect makes a huge difference over a long run. Every time you get a pay hike, try to put some part of it into retirement planning vehicles.

Develop a disciplined approach towards money right from the start. A habit of putting away money for life events like marriage, having children, starting a family and contingencies like medical emergencies, losses due to damage to property or theft, etc will ensure that your retirement fund stays untouched.

You work hard all your life to provide security and quality lifestyle to your family. Post-retirement period is something you shouldn’t miss on. It’s not at all wise being debt ridden while you approach retirement age. Compromising with your standard of living should not be on the list. So be a smart person to start early and reap the benefits of being an early-bird.

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