Retirement Planning –Why it’s better to start earlier than later

As humans, it is expected that as the years go by we also grow older and with age comes life experiences and knowledge. These experiences teach us a lot of things inclusive of the importance of delayed gratification. Unfortunately, the state of the modern day economy has taught a lot of individuals that the values of the cash of today might be more than the cash of the future. So even with the knowledge of the importance of having savings for retirement, most people tend to procrastinate and end up regretting it.

Most companies are now stepping down on pension plans for staff and even social security is becoming a worrisome issue so it is wise to start preparing that retirement plan to have something to fall back on. If the planning process is delayed then you have more to lose in terms of future gains.

Planning Early is Key

To get the point across of how early retirement planning is beneficial, the example of two men will be used to explain further. A 22 year old college graduate begins to save as soon as he gets his first job but the 35 year old man waits till he is married, with a mortgage loan and two children before he realizes that it is time to start saving for retirement.

With the annual rate of return assumed to be 3% and an investment of $5000 annually, the 22 year old man will earn a sum of approximately $460,000 while the 35 year old who delayed planning will only have $257,000 which is significantly lesser than the 22 year old. The lesson to be taken from the example is that when it comes to retirement planning, waiting more than necessary can prove expensive and this is also the case in insurance planning.

Anyone with a job that has the responsibility of taking care of themselves alongside family members knows that life is filled with curveballs, accidents, burglaries, natural disasters etc. can happen anytime. These incidents bring about their own costs and if nothing is put in place for them, then expenses pile up. The following are two of the benefits that can be attributed to early retirement planning:

INVESTING

Everyone knows that when it comes to investing, the sooner you get in, the larger the amount of rewards. It is also known that the ventures that have higher volatility give the highest yield. This means that if you get in early, you have the chance to recover if something were to go wrong and take on more investments that might yield better results. This can be related to retirement planning as interest rates can be up one day and down another day, getting in early improves your chances of getting more returns.

SPENDING

Saving early indicates being cautious in how money is spent. Investing early means that spending is based on a budget and unnecessary expenses can be done without. The goal set is to earn money that can be put into savings.