Why Planning Your Retirement Early is a Smart Move

The older most of us become, the more we start thinking about our retirement. However, planning your retirement early is one of the smartest decisions you can make in your life. Life moves very quickly, we hear it all the time “you blink, and it’s over before you know it.” Being prepared for the latter half of your life will make it a feel like a well deserved stress-free vacation whereas if you don’t, you may find yourself stressed and affecting your health in a negative manner. 

Here are some important reasons as to why you should start planning your retirement early on.

The Most Powerful Force in the World

Compound interest is the most powerful force in the world. “He who understands it, earns it, he who doesn’t, pays it.” Albert Einstein once said this about compound interest. Compound interest is the interest calculated on the initial principal which also includes all of the accumulated interest of the previous period. What this means for you is that the longer you are putting savings away into an account and accruing interest on it, the more powerful that interest becomes over the years. This is why it is important to start saving for retirement as early as possible. The value of your dollar saved today is magnified over the years, allowing you to multiply your savings drastically.

There Could Be No Choice 

Saving early for retirement is always a smart play. About a quarter of all Americans don’t even intend to retire at all and another quarter intends to work past the age of 65. These plans are fine if that is what you wish to do, but it is still important to plan for retirement as a contingency plan in case things don’t go exactly the way you wish them to. For example, you could be laid off because the company you’re working for is downsizing, or you simply can’t maintain your workplace anymore as the work can be too difficult, your health may degrade, or you injure yourself and this prevents you from being able to do your job. Regardless of your current job and retirement plan, the experts at MyRetirementRehab suggest getting the earliest possible jump on your retirement as they show some pretty sobering numbers about retirement stats. Most Americans are woefully unprepared for retirement and the biggest difference to being prepared is to start making a plan now!

Develop Good Habits

Saving money and putting it aside every month can be a difficult thing to do. There is always something else you can find yourself spending money on. However, saving early for retirement can help you start building positive healthy habits. Your reward for building good habits early on in life will be the growth of your savings account. To demonstrate an example, In order to save 1 million dollars, which is a comfortable sum to retire with, we will see how two different people save. Person 1 starts saving at the age of 25, and they need to put away 381$ every month in order for interest to accrue into a1 million-dollar figure in 40 years. Person 2 did not start saving until the age of 35. Person 2 will need to put away 820$ in order to reach the same goal at the age of 65. Now when we think of our incomes, 380$ is about an average new car payment, so it is not out of the realm of possibility to start putting that sort of money away. However, 820$ per month is starting to reach unrealistic savings per month. That is a lot of money to put away and you might find yourself falling behind to pay for other expenses. Building your good habits not only saves you time money, but the effort and stress as well, let the money do the work for you.

Recommended: 4 Practices That Make Every Retiree Happy

Options

As mentioned, some folks never plan to retire. This is totally fine, many people love what they do and it keeps them healthy and involved in everyday life, which is very important especially at an advanced age. However, circumstances are not always ideal and you may find your opinion on working has changed since you made your decision several years ago. Now you are left without a plan, and without a choice. Planning early for retirement at least gives you a sense of security and comfort. Knowing you don’t have to work but want to make your job and life a little bit easier and fulfilling. 

Saving early for retirement is the best step you can take to secure your financial freedom and peace of mind in the latter half of your life. Compound interest is the most powerful force in the world and you need to make it work for you. The sooner you start, the more powerful the compounding effect. Saving early for retirement will also help you build healthy saving habits that you maintain throughout your entire career and retirement. Many people who don’t develop these habits find themselves in financial ruin and work on all the time! Lastly, just because you made a decision now doesn’t mean you will stick with it for the rest of your life. Plans change and life happens, save early and leave yourself options because you never know what is waiting just around the corner for you.