Retirement planning is a wise financial strategy that secures your future. Your contributions to the retirement kitty ensure that you have some financial security, fun, and comfort at old age.
The U.S. Department of Labor estimates 20% of the American workforce never save any part of their annual income, creating an uncertain future. Planning for retirement allows you, whether you are in your first job or dream job, to grow your retirement accounts to a place where they can act as a stable financial cushion. Here are seven benefits of retirement planning.
1. Compounding Effect
The life expectancy in the U.S. has been on a steady rise for the last four decades, reaching 78. 6 years. With most people enjoying life past this average, you need to plan for a longer retirement period. And the best time to start is now. The acorn you plant as contributions will grow and mature to a majestic oak tree of financial freedom in your old age.
2. Contextualization of Your Financial Decisions
A savings plan for your future may help you make vital life decisions. Talking to your financial planner on retirement may help you decide if it’s wise to take up a mid-life or late degree for career growth. Additionally, you can effectively plan for your spending and lifestyle needs with your spouse.
3. Tax Savings
One of the huge advantages of planning for retirement is tax savings. No one loves to pay more tax than they should. Tax diversification allows you to benefit from various programs that encourage retirement financial planning. Tax-advantaged, tax-free, and tax-deferred accounts can help you save 10-50% of your earning from your retirement investments.
4. Diverse Source of Income
Expert financial advisors argue that you need 70% of your previous income while in retirement. A 2012 study by Genworth paints a different picture. 52% of respondents said they expected their expenses to reduce at old age. However, 65% of the interviewed retirees saw their cost increase in that period. Retirement planning with a registered investment advisor allows you to open new income streams for your old age.
5. Better Healthcare
80% of retirees say that healthcare plays an essential role in happy retirement. With medical inflation up 14% every year, proper planning for retirement can help offset the high healthcare costs in the future. Your retirement earnings will cater to unforeseen medical expenses, reducing the burden on your family.
6. Peace of Mind
The American Psychiatric Association estimates 70% of adults worry about money, leading to unhealthy lifestyles. Health complications including stress related diseases and High Blood Pressure are becoming common, as more Americans worry about their future. Early retirement planning eliminates the fear and spares you many sleepless nights worrying about your financial independence.
A recent study shows that most retirees want to continue with their charity donations even in their old age. It’s only possible if one is financially secure in old age. Seeking financial planning services can, therefore, help you continue impacting the world through your favorite charitable causes. Besides, retirement plans coincide with effective estate planning that aligns with your legacy goals.
Proper planning for retirement allows you to create a robust investment portfolio for you to reap in your old age. It’s neither too late nor too early to start saving for your future. Search for a top financial advisor and plan for your later years.