Is It Too Early to Plan for Retirement?

This commonly asked question has a straightforward answer – it’s never too soon. Let’s find out why.

Time flies

Young people tend to view retirement as something far off in the distant future. While it is years away, time can fly. As people move through life, they embark on experiences. There are graduations, careers, marriages, first homes, children, and life adventures. It happens all too fast. Then, before you know it, the kids are graduating, and suddenly retirement is not so far away.

Think long term

To focus only on the present is shortsighted. One must always think about the future. Even people in their 20s who are just starting careers can reflect on retirement plans. While it is likely a goal to work toward paying off student loans, early planning can reap many long-term benefits to help secure one’s financial future.

Securing financial security for the future starts now

Truth is, when you start saving for retirement while you’re young, time is in your favor. Saving even a little bit over a long time can go a long way to help secure the future. Here are some smart ways young people can begin saving for retirement:

• Consider an Individual Retirement Account (IRA) or a Roth IRA. The first is a traditional IRA that is sometimes deductible on a tax return. The second, a Roth IRA, is not deductible, but what is taken out in retirement is 100% tax free. Both are subject to income limitations and some other rules, so check with your tax advisor.
• Invest in your retirement plan at work. This can include something like a 401(k) Retirement Plan where an employer may match your contributions. There may also be profit-sharing options. Check with your employer.
• Set aside money in an investment account. This includes having a diverse portfolio of stocks and bonds. The risks associated with these types of investments can vary depending upon goals and risk tolerance, and there are many investment options available.
• A savings account is another way of setting aside money, but generally with a much lower return.

I’m 50 and I don’t have much saved for retirement. What should I do?

It’s likely that you are still in the workforce. It serves you well to start saving right now. You still have about 17 years or more to save up for full retirement. Consider your goals and talk to your financial advisor about the best path to take and your ultimate goals. You can take advantage of the ideas listed above. Also consider ways to cut back wasteful spending so that you can put more away toward retirement. You may need to save more aggressively to hit the target amount of money needed for comfortable retirement. Know that some sacrifices are well worth the peace of mind they bring in the long run.

Oh no! I’m 60 and I don’t think I’ve saved enough. Is it too late for me?

It’s important to sit down with a trusted financial advisor who can provide sound advice for your future. Here are some topics you’ll likely want to talk about: your savings and investments, overall financial status, dipping into your home’s equity, finding ways to save more, living frugally up to and in retirement, what to expect from social security, life plans and visions, and options to work longer and move retirement age back. The thing is – financial planning is always a good idea no matter what your age.

More food for thought

Planning for retirement is something that is best started young. Not only do young people have time to accumulate savings, but saving can become harder once older. Health issues and earning declines are some examples of occurrences that may accompany advances in age. Young people must also consider the possibility of declining Social Security benefits. Per the Social Security Administration, the Social Security trust funds are projected to run out in 2035 unless changes are made to the system. This may lead to declines of benefits at retirement age. Young people should consider this when building retirement savings. It’s not a bad idea for young people to save as much as they reasonably can, whenever they can, to solidify their finances for the golden years.

Disclosure: This article is purely informational and is not a substitute for financial advice.