It’s something many of us never really think about through the course of our careers. Looming far into the distance, the concept of retirement and subsequently planning for it never truly crosses our mind, and planning for it sometimes becomes a last minute effort full of stress and anxiety.
Here are a few reasons why it’s better to prepare for retirement now rather than late:
Nothing is more stressful than worrying about money. Entirely eliminating those concerns will probably never happen, but planning ahead can reduce some of the stress involved in planning for retirement. Some common fears most people have about retirement are easy to understand. Running out of funds, unreasonable amounts of debt, and the perils of inflation can all become costly potential issues as you grow older. Planning ahead and keeping all of your finances and documentation in a common, secure location (like an app or computer program) will help ease your mind as you prepare for your financial future.
The general consensus among most financial advisors is that you should try to have enough funds (in retirement funds, social security, a pension or other sources of income) to replace 80% of your pre-retirement income. Financial planning and goal-setting is always good practice but becomes increasingly important as you near retirement age. The key is to always “pay yourself,” a little bit of each paycheck as savings, and look for investment options that can maximize your savings.
Using retirement planning and saving tools in a convenient app can help take some of the accounting and frustration out of planning by handling some of the finer details for you as you set and evaluate your financial and retirement goals. Sometimes it’s better to have a snapshot of all your financial details in one place—including retirement accounts like a 401K or an IRA—so you can plan ahead without diving through a mountain of paperwork across multiple places just to figure out your finances!
Many employers offer a 401K plan with an employer match option. Depending on the employer and how far along you are into your career, you can either start small (by contributing the minimum amount to qualify for the full employer’s match) or start contributing more over time. The biggest advantage of a 401K is the higher contribution limit, which is much larger than an IRA for a single year depending on your age.
Keep in mind that some employers do not offer a match, so plan your investment accordingly.
Choosing an IRA based on your personal financial needs can help bolster and strengthen your own retirement fund. Each plan offers unique benefits and all of them are useful depending on your particular situation. You may wish to try the ROTH IRA calculator, which can help you to choose the right retirement account for you.
Retirement planning can be a daunting, difficult task. Other investment options are a viable and useful option if your employer doesn’t match a 401K, you have extra money to invest or you want to branch out a bit on your retirement savings portfolio. Investing in stocks or taking advantage of mutual funds, bonds, and money-market instruments (if your company offers them) can all be useful investment options to maximize your savings and make planning for your retirement a breeze.
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