There’s nothing more difficult to a child than trying to understand how not buying that piece of candy now, and saving your money, will mean you can afford more or even better candy later. The problem with instant gratification is one of those life lessons that seems nearly impossible to understand when you’re little, and to be completely honest, is still difficult to understand as an adult.
For some people, thinking and planning for tomorrow is hard enough, let alone the next ten years, let alone retirement in 20+ years. The fact is, however, that a comfortable retirement isn’t something that is just handed to you. You’ve got to start planning for it now if you want to continue your standards of living well into your retirement.
Because it’s hard to comprehend, and even harder to take action for saving and planning, we’ve created a list of the top reasons why you need to start planning for your retirement now, along with a few tips to help you get started.
More than anything, money is the top reason to start planning for retirement. Unless you’ve found yourself an amazing job that you know you’ll stick with until retirement, and they provide an incredible pension or retirement plan, you’ve got to do more, now.
Let’s say that you decide to retire around age 65. The average life expectancy right now is about 78 years, so that means you’ve got potentially 13 years to plan for. Think about a year of your spending right now. Include your bills, your mortgage or rent payments, car payments, and typical spending habits. Now multiply that by 13. If you want to continue your quality of life past retirement, you’ll need, very approximately, around that amount.
To go a bit more in depth than this, start by completing a couple of retirement calculators. These will give you a clearer picture about how much money you’ll need to retire, and how much you’ll need to start saving to do so. Being aware of your financial goals is the first step to being financially secure later on.
The great news about saving for retirement is that the sooner you start, the better off you’ll be. Even if you’re only putting away a little bit each paycheck, you’ll be that much closer to your goal, because of something called compound interest. When you place funds in type of savings account that accrues interest, the sooner you put money in it, the more time it will have to grow and earn interest. As your account grows larger, it will continue to earn more interest on the higher balance. The important part of this point, is time. The more time you have, the more interest earning potential you have, meaning you can passively save and earn money.
Another important planning item for retirement is making sure that your family, loved ones, and partner are taken care of in the event of your death. Pretty morbid, right? And yes, pun is intended. As uncomfortable as it might be to think about now, it’s important that you at least consider life insurance to avoid leaving your loved ones with the stress and sadness of having to deal with your finances.
Now, if you are young, healthy, still relatively dependent on parents, and with little to no debt, this is probably not as important for you. Life insurance is important for people with dependents, who rely on you for financial support and will need a cushion after your passing, as well as covering funeral costs and outstanding debt.
One of the biggest reasons why it’s important to start thinking about life insurance now, is because of changing rates. As you age, or develop health conditions, life insurance can get more expensive. If you go with a more permanent life insurance option versus a term or variable option, locking in a lower rate now will end up saving you more money over the long run.
Another, less common way of planning for your retirement is considering the home and property that you live in now. The reality of getting older is that we become less able to care for ourselves, our partners, and our property as time goes on. This can be an incredibly difficult thing to accept when that time comes.
When we’re young, we don’t give a whole lot of thought to the strains of what stairs, a large lawn, or an older home can have on us. And to be fair, we don’t really need to. We can easily handle the work. But later on in life, you might start considering buying a home that could be your forever home. As in, you’ll live here until the end of your days.
When you’re starting to look at homes this way, think a little bit about what life would be like in that home well into your 70’s or even 80’s. How accessible are things like the bathroom or the laundry area? If you’re buying a home with lots of property, will you be able to hire that out to someone in the future?
In addition, you’ll want to consider how soon you’ll be able to pay off the home. If you’re purchasing something way out of your price range, you may end up cutting into your retirement fund to help with payments well after retiring. Make sure that the mortgage is not only something you can afford month to month, but also will be manageable or paid off later in life.
It’s just not easy to think about long term like this, and that’s completely fine and normal. But, instead of shying away from it and denying the inevitable, try just taking some baby steps to secure your future and make retirement more comfortable. Just like a lot of things in life, taking some initial steps will only make it easier to take larger steps later on, and eventually be on your way to the retirement that you imagine.