When you’re in your 20s, it’s likely that you may not be thinking about your retirement. However, the sooner you start to plan your retirement, the more money you’ll have when the day comes.
Should people in their 20s plan for their retirement? Yes. There’s no harm in planning for retirement as early as possible.
The Benefit Of Early Retirement Planning
Some young people assume that they need to make a lot of money before they can make use of retirement services. However, the fact of the matter is that it’s possible to plan for retirement even if you’re not making $50,000 a year.
The sooner you start to save the more money you’ll have when you retire. This is the main benefit of early retirement planning.
Making Smaller Monthly Payments
Let’s imagine that you want to save $100,000 for retirement. You also plan to retire at the age of 60. If you start saving when you’re 45, for example, you may have to pay $555 a month for 15 years. If you start saving when you’re 25, you may have to pay just £238 a month for 35 years.
Of course, these figures are just an estimate and you may end up paying a completely different amount. However, they do show that you can still save just as much, but you’ll make smaller payments.
Smaller payments are easier on everyone’s bank accounts. In addition to making smaller payments, there is the interest to consider. Add some interest to the payments made, and it’s likely that you may have more than $100,000 at age 60.
Changing What You Want
When you choose to pay into a pension fund or bank account, you can change what you want. For example, at the age of 25, you may consider retiring at the age of 60. However, once you’ve reached the age of 35, you may have decided to opt for earlier retirement.
The younger you are when you change your mind, the easier the process might be. For example, if you decide to retire at 55, it’s better if you’ve already paid into your pension for the last 30 years. If you’ve only been paying for the last 10 years, you might not be able to afford retirement.
In other words, the sooner you pay into a pension fund, the sooner you can retire.
What To Consider
There are many different factors that are worth considering when you want to plan for your retirement. These include:
- How much you can afford to save each month
- What is your savings goal is
- What age you’d like to retire at
- If you have any preexisting medical conditions
- The type of pension you’d like to have
- If you have other pensions
When you take all of the above factors into consideration, you’re more likely to have a pension you’re pleased with.
The Market Risk
Some pensions come with market risks. Pensions such as these tend to be those with the highest return rate. Stocks, for example, can be quite risky. If you want to keep the market risk as low as possible, opt for a low rate of return.
Low rates of return might not seem very exciting. However, something is less likely to go wrong.
Saving At A Young Age
When you start saving towards a pension at a young age, you’re investing in your future. People who start saving in their 20s should:
- Pay no more than they can afford
- Make sure they get a good deal
- Save money so they have funds set to one side for an emergency
- Understand that there might be a market risk
- Have a plan for retirement
- Be aware that they can change their plans at any time
Saving for retirement at a young age is a wonderful thing to do. There are many types of pensions, and each has its own advantages and disadvantages. However, knowing what these are can really help.
Talk With Someone You Trust
Talk with someone you trust about opening a pension fund. Talk to a financial adviser or an accountant. They may be able to help you make the right choice. Saving for a pension when you’re in your 20s can seem quite extravagant. However, when the day of your retirement hits, you’ll be glad you did. Chances are, you could even have more money than you thought you would have.
Should people in their 20s plan for their retirement? Yes, they absolutely should. The sooner they do, the more money they could have when they retire. There are many plans out there that are ideal for people of all ages and all incomes. Start saving today so that you can have an enjoyable retirement.
