Why Retirement Planning Should Start Sooner

Paul Miller |

Retirement might seem like a distant specter that you do not have to concern yourself with until you are middle-aged, but in reality you should be saving for retirement sooner rather than later. The Motley Fool cites some statistics that paint a depressing portrait of the state of savings in the United States as of 2016. For example, only 22% of US workers are confident they will have enough money to retire with, and 45% of Americans have no retirement savings at all, with 40% of baby boomers included in that group.

The Sooner, the Better

Planning for retirement sooner makes it easier for you to reach retirement age with financial stability. When you start establishing the positive habits of healthy saving in your youth, it gets easier and easier to stick to those habits as you age. This means you have a better chance of reaching your goal and enjoying a relaxing, stable retirement.

Given those statistics from the Motley Fool, it is clear that most people are finding it difficult to save for retirement. Additionally, the Adding to the problem is the fact that for most people, the average retirement amount simply is not enough. However, if you start sooner you give your savings enough time to grow. With relatively small investments in your youth, you can wind up with a significant balance in the future.

Expert Advice is Key

Unless you are a financial advisor, the odds that you will be able to successfully direct your own retirement savings are pretty low. As noted by Forbes, financial planning goes beyond simply knowing where and how to invest your retirement savings. Of course you will want a mixture of stocks and bonds to build a healthy retirement fund, but there is more to retirement planning than that simple knowledge.

Professionals can help you determine your retirement timeline, and make it easier to assess how aggressive you can and should be with your investments. Working with a financial advisor now gives your investment a longer period of time to recover in the event of market downfalls. This also means that, by investing in higher-risk funds, you have a greater opportunity to enjoy higher returns.

Capitalize on the Power of "Now"

It is impossible to control the events of the world. You could not control your past any more than you can hope to control the future. The only thing you can control are the decisions you make now. By working with a financial planner to chart a successful course toward retirement, you can turn your financial life around now and in the future.

Power of Compound Interest

One of the greatest reasons to start saving sooner is the ability to take advantage of compound interest. This effectively allows you to make money on your money, earning interest for the interest gained on investment returns. Consider this example. If Investor A puts away $1,000 annually over a 10-year period beginning at age 30, they will have roughly $62,385 by age 65.

Conversely, if Investor B puts away the same amount of money ($1,000 annually), but waits until age 45 and does for 20 years (twice as long), they will only have $38,993. Investor A, because they started sooner, had to save just half the amount of money as Investor B, but made 50% more by retirement.

Compound interest is the engine that powers your retirement plan forward. There is no time like the present to begin investing for your retirement, so make sure to speak with Paul Miller, CFP®, today for more details.