Retirement savings, Why starting early is important

2 min read

retirement savings

Bearing in mind that you will not remain agile forever, your plan for the future is incomplete without an appropriate retirement plan. An integral aspect of your retirement plan is retirement savings and how you intend to use it. A properly planned retirement ensures that you live the life you desire when you finally retire. This article discusses the importance of starting early to save for your retirement.

In many countries, the idea of retirement is of recent origin. Unlike previously when low life expectancy and retirement pension plans were not in place and individuals had to work until they die, workers now have the privilege of retiring from work whenever they feel they have worked long enough. Retirement benefits were first introduced in Germany in 1889.

What is retirement?

Retirement can be described as the deliberate withdrawal from one’s position or occupation or from one’s active working life. An individual could either retire deliberately when he feels he is eligible for private or public pension benefits or otherwise; ageing poor state of health or diminished strength due to aging. Most individuals who do not retire deliberately are met with unexpected situations which might eventually lead to retirement. Regardless of the circumstances surrounding one’s retirement, life after retirement if it had been adequately planned for.

What is a retirement pension plan?

A retirement pension plan is a plan that requires an employer to make contributions into an account of funds set aside for a worker’s future benefit. The pool of funds is then invested on the employee’s behalf. Sequel to retirement, the earnings on the investments generate income to the worker.

In addition to an employer’s required contributions, some retirement pension plans have a voluntary investment package in which a worker may be allowed to contribute a certain percentage of current income is directed into an investment plan to help during retirement. A portion of the worker’s annual contributions may also be matched by the employer up to a specific percentage or amount.

If you are not satisfied with your employer’s contributions, you can start your own way of saving and managing money like this

Benefits of early retirement savings

In reality, you might be decades away from retirement. Rather than getting complacent by virtue of this fact, it should spur you to start saving as early as possible. According to experts, you will need about 70% of the income you make at the peak of your career to maintain a good standard of living even in retirement.

Still contemplating whether or not saving money early for retirement is worth it? Below are some of the benefits attached to it.

  • You will live comfortably when you finally retire: imagine you start to save money for retirement in your 20s; by the time you reach retirement age, you would have saved enough money to secure a good life after retirement. This includes being able to afford anything of your choice, going on vacation, etc.
  • You will be able to retire at an early age: saving early for retirement gives you the rare opportunity to decide for yourself when you want to retire. However, this decision stems from the assurance that your future in retirement is indeed secure. This also translates to having viable investments.
  • You Won’t Have To Deal With Account Contribution Limits: a variety of retirement plans have certain limits imposed on how much you can contribute to your account each year. Saving early for retirement saves you this trouble as you won’t need to save a huge sum of money at once just because you feel the time is running out
  • You will have a stable income after retirement income: saving early for retirement ensures that you are paid as at when due depending on your retirement savings plan, you won’t have to bother about running out of money when you are old or anything related to financial needs. You won’t also have to worry about how to start or where to start from; you had planned from the onset remember? However, in order to ensure that things go according to your plans, you need to consult with reliable professionals.

Unlike previous methods, saving for your retirement just got easier with the advent of retirement pension plans, retirement savings, and the likes. It is equally important that you start saving early; as the saying goes- The early bird catches the worm.