When one is young, it often seems that retirement is a long time away. Spending money on eating out as often as possible, traveling, and other exciting but also expensive pleasures is very tempting. And once you start a family, expenses multiply even more! Providing and caring for your kids, saving for college - it all takes priority on your list. And while all of these are important, it doesn't mean you won't be able to enjoy your retirement when the time comes. On the contrary, if you make a good plan and make financially wise decisions, you'll spend your senior years in comfort and pleasure. However, the key to achieving this goal is to start your preparations on time. With that in mind, we've composed this guide on the best time to start planning for your retirement!
Why is it important to start planning for your retirement?
Although retirement seems a matter of the distant future, making your plans early is important. It enables you to build good financial habits and save more without overburdening yourself. Naturally, your goal is to be financially independent and enjoy your retirement. In order to live comfortably, you need to have sufficient funds. That means taking into account several things.
For example, you should give some thought to your housing situation. While you don't mind renting in your 30s or 40s, by the time you retire, it would be a good idea to own real estate property. Additionally, you want to have enough resources to take care of medical bills and other needs. Not to mention all the funds you need to live your golden years happily and carefree.
Once you start working, it's time to start planning for your retirement.
Decide what lifestyle you want to lead once you retire
However, before you tackle the finances, give some thought to your expectations and wishes. How do you plan to spend your retirement? Most people want to relax and take up new hobbies, connect with their old friends, or even make new ones. On the other hand, you might want to lead a more active lifestyle - traveling and exploring new things. Do you plan to continue working after you retire? Whichever you choose, do your best to estimate your retirement expenses. Of course, things might change in the future, but having approximate numbers will help you make sound financial plans on time.
Where do you plan to live once you retire?
Another thing to consider is where you want to retire. If you spent your working years in the hustle and bustle of NYC, you might want to settle somewhere quiet and more peaceful. If that is your goal, there are quite a few popular places in New York State for retirees. For example, Nassau County is one of the best for retirees. Of course, that means you should start planning to buy a home there as well as relocate. Moving is often a stressful and demanding task that also requires detailed preparation.
On the other hand, some people prefer to stay closer to their families and enjoy their retirement surrounded by their children and grandchildren. More adventurous seniors envision themselves retiring to some tropical paradise or traveling all over the world. Whichever option appeals to you the most, it's crucial to start preparing financially for it and make your retirement dreams come true.
It's never too soon to start saving for retirement
So, to put it as simply as possible, the sooner you start planning for your retirement, the better. Ideally, it would be best to start saving right after college - as soon as you get your first job. Young people often find money management a challenging task. It often seems the time is never right - there are simply too many other things you want and need. However, the earlier you start, the easier the task will be. Here are simple steps to help you make sound decisions.
Keeping track of your spending and savings will keep you on the safe track.
Start budgeting and keep records
First things first, you need to start budgeting. That doesn't mean you should set aside half of your salary. However, it does mean you should spend less than you earn. Ideally, you should be able to live on 85% of your salary and put away the rest into savings or investment.
To achieve this goal with ease, start keeping records. There are many spreadsheets and apps that will help you keep track of your spending, savings, and investment. Having a clear picture of your financial situation will enable you to make rational and sound decisions.
Learn more about your employee benefits
The next step is learning more about your pension plan and making the most of it. Once you have a full-time job, your employer will offer you some benefits - including a retirement savings plan. Ensure you understand fully how it works and how you can use it. There are several different types, and which one you get will depend on your job and the company you work for.
Compounding is the key to planning your retirement
While it's never too late to change bad financial habits, starting saving early can make a big difference. When you start putting money into a retirement account in your twenties, time works for you. The more time you have, the more your money will grow. That's because compound interest is calculated on both the accumulated interest as well as on your original principal.
If you invest smart and avoid debts, your money will grow
Avoid debt
This is easier said than done in today's world. However, not all debt is bad - starting a business or purchasing a home can be a good long-term decision. On the other hand, consumer debts such as car loans, credit cards, or student loans are riskier. They often have high-interest rates, which will erode your finances more and more over time. If you can't avoid these debts, ensure you have a plan to get out of them or try looking for a higher-paying job.
Assess risks before making an investment
Lastly, avoid making risky investments. This is not always an easy thing to do. Possibilities are often tempting, and people with little or no experience or adequate knowledge are more likely to make costly mistakes. So, before you choose to invest, don't hesitate to consult the experts who will help you assess the potential risks and determine ROI.
Final thoughts
So, what's the best time to start planning for your retirement? The answer is simple: as soon as you land a job and start earning money. With a bit of planning and know-how, you'll be able to enjoy a secure, comfortable, and happy retirement.