It is important to start retirement planning when you are as young as possible. Starting young matters because you have more time to save. Many people do not have enough saved for retirement, which can result in substantial financial struggles and stress as they get older. You don’t want to find yourself without enough money to be comfortable. The sooner you start your retirement planning process, the easier it will be to amass a nest egg that lets you travel, relax, and enjoy retirement instead of worrying about money.
The Law Offices of James A. Miller is here to help you if you want to make smart plans for retirement. We provide assistance to people at all different age levels, and can tailor our advice and guidance to your income and life situation. Whether you are nearing retirement and getting nervous about having saved enough or you are just beginning your career and you want to set yourself up on the right path to become a financially secure senior, we can help you.
When Should You Start Retirement Planning?
Retirement planning should start as soon as you begin earning money and can put aside a portion of that money for your retirement. If you begin to save when you are young but put away smaller amounts of money, you will actually end up with more saved than if you wait until you are older and make larger investments. This happens because of compound interest. Your invested money grows and the growth is reinvested and helps you to earn more returns even more quickly.
Far too many people wait a long time to begin retirement planning, which is why Investopedia indicates the average person in the U.S. who is between age 55 and 64 has just $104,000 in retirement savings. If the average person purchased an annuity with that $104,000, he would receive $310 per month in payments. This is, of course, nowhere near enough money for a person to live on.
For those in their 20’s, the average retirement savings is just $16,000 while thirtysomethings have saved only about $45,000 on average. By the time people reach their 40’s, Investopedia indicates “most Americans are dangerously behind at this point,” as their estimated retirement savings are just $63,000. This is well below even conservative benchmarks which suggest their nest egg should be three times their annual salaries.
It can be hard to set aside money to save for retirement, especially when you have immediate and pressing financial needs to take care of like paying for rent, student loan payments, and other day-to-day cost. Retirement planning, begun early, allows you to come up with a plan to make contributions in comfortable amounts to your retirement so you don’t fall behind in your savings efforts.
Another Reason to Start Retirement Planning Early
There is also another reason to start your retirement planning process early: you want to take advantage of the chance to make annual contributions to tax-advantaged accounts. Individual retirement accounts, or IRAs allow you to invest up to a set amount each year which is either tax-free when invested or which allows tax-free growth.
If you miss out on a year of investing, though, you never get back the chance to make the contributions for that particular year. As a result, if you start early, you can take advantage of these tax breaks every single year and let the government help you to make saving for retirement easier.
Eligibility to contribute to IRAs can be affected by earning higher incomes, which means if you make too much money, you will no longer be eligible for these tax breaks. If you begin investing when you are younger and your income is relatively lower, you won’t have this problem and can get in many years of tax breaks.
Getting Help with Retirement Planning
Investing early and taking advantage of tax breaks is clearly one of the smartest things you can do as a young person if you want to set yourself up for a secure future. However, no matter how old you are, it is not too late for you to make smart investments and to help achieve more financial security as you get older. Even as a senior, you can make smart choices about how much to spend and withdraw so you can make your money last.
The Law Offices of James A. Miller, P.C. can help you. Our experienced Massachusetts retirement planning lawyers work hard to help clients. To find out more about the retirement planning process, download a free estate planning worksheet. You can also give us a call at 866-370-3888 or contact us online to speak with a member of our legal team and learn more about personalized help we offer you.
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