Young people are filled with excitement when they begin their careers and retirement is often the furthest thing from their minds. This is actually the ideal time to begin planning for the golden years. Today’s youth should not rely on Social Security benefits or generous windfalls from investments, so taking a proactive approach to retirement planning is recommended.
The number of employers offering pensions is dwindling, so it is up to the employee to develop a plan for retirement savings. It is important that people start saving early and regularly put away money to use toward retirement. Those who do not consider themselves financially savvy may want to consult with a financial planner or investment adviser to develop a diversified approach to saving for retirement.
Many people are unaware of how much they need to save in order to live comfortably in retirement. The truth is that it varies based on the amount of money necessary during the retirement period and the age at which a person plans to retire. Most people can live comfortably on about 75 to 80 percent of their pre-retirement income.
To illustrate the difference that starting to save early can make, take a person who wants to save $500,000 for retirement. Assuming an eight percent return on investments, people who begin saving 20 years prior to retirement will need to save $875 per month, while those who start saving 30 years before retirement will need to save only $355 per month. This is a $420 per month difference that a person would likely be able to apply toward mortgage payments, home improvements, or child care expenses.
In order to be able to live more comfortably pre and post-retirement and not have to work years longer than planned, start saving as soon as possible. Those whose employers offer a retirement savings plan should take advantage of this great benefit. Others may consult a financial planner in order to open their own retirement accounts. Taking a proactive approach to saving for retirement will result in less stress in the later years.