Saving for retirement is becoming more and more important. To live the life you dream after retirement, you no longer can rely only on savings plan offered by your employer, or on social security alone. You should begin planning your savings for your retirement as soon as possible.
Why is a Retirement Plan needed?
A retirement plan helps you to set your goals, decide at what age you want to stop working, and lead the life you want to lead after retirement.
Drafting a retirement plan helps you to calculate how much you need to save now to have your dreamed retirement life.
A retirement plan helps you decide where to invest by taking into consideration your income, risk tolerance, and age.
Retirement Plan Examples
|Saving for 40 years||Saving for 30 years||Saving for 20 years|
|Monthly Investment||$ 100.00||$ 100.00||$ 100.00|
|Total Contribution||$ 48,000.00||$ 36,000.00||$ 24,000.00|
|Total Interest Earned||$ 70,196.00||$ 33,405.00||$ 12,677.00|
|Total Value of The Investment||$ 118,196.00||$ 69,405.00||$ 36,677.00|
The earlier we begin to contribute to our savings, the greater the outcome we receive after retirement as a result of compounding interest. That is why the decision to start saving money in your 20s can be one of the best financial decisions you make in your life.
Here are some tips to get the most from your Retirement Plan
Start contributing to your retirement as early as possible
Set up automatic withholding from direct deposits in your current account, and have them go into a special retirement account.
Take into consideration that contributions to traditional 401(k) retirement plans are tax deductible and can therefore reduce your income tax.
Diversify your investments (do not put all your eggs in one basket)
Choose an investment plan that offers low management fees.
- Choose an investment plan that takes into consideration your income level, tolerance to risk, and your age.
Avoid early withdrawal of retirement funds. There is usually a penalty for early withdrawal of funds. Try to put aside some funds for emergency cases so that you don’t have to withdraw from your retirement savings in a pinch.