If you’re in your 20s, fresh out of school, and just starting your career, retirement is probably the furthest thing from your mind. That’s understandable. You have at least 40 years until you can actually retire, and that may change as medical advancements continue to help people live increasingly longer lives. Seniors are now healthier than they were even 20 years ago, and the average life expectancy has continued to rise, meaning that people have to work for longer than they used to.
There are many reasons to start planning for retirement now while you’re young, healthy, and vibrant.
Social security is running out.
The Social Security trust fund is expected to be completely depleted by the year 2034. Not only is that bad news for those who have already spent the last 10-20 years of their career contributing to something they will never benefit from, but it’s bad news for anyone who will reach retirement age after that point. It’s possible this will be rectified by then, but don’t put all your retirement eggs in one basket. Forming a retirement contingency plan is in your best interest.
You might be able to retire early.
If you start contributing to a retirement account now, giving it about 40 years to grow, you might even be able to retire early, depending on the type of retirement account you choose, and how much interest you earn on your investment.
You get tax breaks on your contributions.
For certain accounts, contributions are tax deductible, or are made with pre-tax dollars. This could save you money during tax season.
You won’t have to contribute as much over time.
Unlike those who only started a retirement fund in their 50s and have to make enormous contributions each month, you can make small contributions for a longer period of time and end up in a better financial position than those who are currently closer to the career finish line.
You could retire rich.
If you plan and save enough for enough time, you could retire with a sizable amount of money (a great deal more than those who wait to invest) and never have to worry about finances in your retirement years.
You’re making your money work for you.
Rather than consistently slaving away at your job, trying to make ends meet while also trying to build a solid savings account, you can start putting in small amounts now that will continue to grow on their own.
You’ll increase your net worth.
Having a higher net worth might also increase your taxes, but in the long run, you’ll achieve greater financial success over your lifetime.
You’re creating a safety net.
Retirement accounts are not meant to be tapped into early, which is why they come with hefty penalties if you do so. However, life is long and never goes according to plan. That’s why it can be helpful to have a retirement account that can save you from total financial ruin or bankruptcy. If you have to take a little money out of your retirement fund early, it’s not the end of the world.
You could travel.
What if you could spend your retirement years traveling the world instead of worrying about living on a fixed income, clipping every coupon, and having to rely on government assistance? If you start planning for retirement now, this is a very real possibility.
You’ll have something to leave to your family members.
Whether or not you have children, or plan to in the future, it would be nice to leave something to those who have loved and cared for you during your lifetime.
You have many accounts to choose from.
Whether you choose to contribute to a 401K through your employer, an IRA, a Roth IRA, or any other type of account, there’s one out there to suit your needs, career, and financial goals.
You’ll define your career goals.
Knowing what you want to do in life is pretty common in a general sense. However, if you have a solid idea of where you want to end up financially, it could help guide you over the course of your career, so when a big decision needs to be made, you’ll know which direction to go.
You’ll get comfortable with investing.
Starting a retirement fund is a good way to dip your toe into the investment pool. It can help you get more familiar with different financial concepts, such as return on investment (ROI), interest rates, and more.
You won’t affect your student loans.
If you start saving now, you’ll only have to contribute a small sum every month (sometimes as little as $10) and still have plenty of money left over to pay off your hefty student loan debt.
You’ll help build credit.
While retirement accounts may not be directly tied to your credit, having a demonstrated history of financial responsibility can help open up credit doors for you in the future.
If you’re concerned about your credit, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get two free credit scores updated every 14 days.
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