According to one recent report, 64% of Americans will retire with only $10,000 in their retirement accounts. While that might sound like a significant amount now, it’s not nearly enough to live on once you stop working.
If you’ve been putting off retirement planning, then it’s never too late to start. Your dream retirement can be within reach, but it takes a little pre-planning on your part. Today, we’re sharing seven important reasons why taking the reins today can lead to a more fruitful financial future.
1. Stay on Top of Inflation
Over time, the general price of goods and services will ebb and flow. However, it generally tends to rise, and this process is known as inflation. Over time, inflation can negatively affect the value of the money that you’ve saved.
Saving your money in a dedicated retirement account is a great first step, but it helps to start as soon as possible. One of the benefits of retirement planning is that the more you accumulate, the greater buffer you have against the inevitable inflation that will occur.
2. Understand Your Needs
Studies show that more than 80% of Americans don’t know how much they’ll need to retire comfortably one day. Assuming that you have enough in your account could lead to some unpleasant surprises down the road.
By planning for retirement as early as possible, you can stay one step ahead. A professional financial advisor can assess exactly how much you’ll need, as well as how much you need to save to reach that point. Then, they’ll help you put steps into place to make sure you get there.
Important factors in this calculation will include:
- Your current assets
- Your current savings
- Your projected living expenses
- Your post-retirement income streams
While you can find online calculators designed to weigh these components and give you a general estimate of your retirement needs, nothing beats working directly with an expert.
3. Enjoy a Stress-Free Retirement
When you finally stop working, you should be able to bask in the glow of your retirement. You should be able to pursue new hobbies and activities that you enjoy, without the financial burden of wondering when your accounts will run out.
According to one report, stress levels peak around 15 years after retirement. During this time, 76% of retirees will experience some type of distress, and the chief contributing factor is anxiety over money.
When you’re under that much pressure, your entire quality of life suffers. You might find it difficult to sleep and eat, much less enjoy retirement travels or pastimes. By planning ahead, you can mitigate much of this stress and feel confident that you’re saving the right amount.
4. Make Wiser Present-Day Decisions
When you have a clear picture of your retirement needs, you can make better-informed decisions now. These can be both personal or professional in nature.
For instance, is it financially smarter to stay at your current job and work for the next few decades? Or, do you have the financial flexibility to branch off and start your own company? Should you pursue advanced certifications, degrees, or licenses in your field?
Personally, you might be considering investing in a vacation home or extending a side hobby into supplemental income. Any of these decisions can affect your financial health, so it’s critical to know where you stand.
Keep in mind that the timeline of your retirement will factor into these answers. If you have 10 years left at your job, then it might be more feasible to consider advancement opportunities than if you’re only a few years shy of the big day.
5. Save For Future Healthcare Needs
It can be challenging to think about your health diminishing as you age. Yet, the reality is that most of us will require some sort of ongoing medical treatment in our retirement stage. In fact, one report explains that someone turning 65 today will have at least a 70% chance of needing some type of long-term care in the years ahead.
It’s no secret that this care can be costly. Saving today can help you build up enough money to cover those expenses down the road. If you’re interested in purchasing long-term care insurance, then it’s also wise to look into these policies as early as possible to secure the lowest premiums.
6. Enjoy Tax Benefits
There are steps you can take today to lower the amount of income tax you’ll pay in retirement. Plus, you can also put measures in place to lower the amount of taxes that your beneficiaries will one day be required to pay.
It all begins with understanding how tax diversification works, and where to save your money. A qualified wealth management advisor can help you understand more about the different types of accounts, which include:
- Taxable accounts (individual savings accounts, trusts)
- Tax-deferred accounts (traditional IRAs, 401(k)s)
- Tax-free accounts (Roth IRAs)
The earlier you start planning for retirement, the easier it is to choose the most appropriate accounts and start growing your money within them. Your advisor will also be up-to-date on all the current tax laws and policies and can help you understand how future changes will affect your savings.
7. Communicate Your Goals
Does your spouse understand your plans for retirement? What about your children or other close family members? It’s imperative that all affected parties are on the same page when it comes to spending and saving goals.
This is especially the case if you plan to financially assist a family member down the road. For instance, you may desire to help your adult children pursue an advanced degree, or start their own business. These decisions may affect your retirement plans, and could even defer your retirement date if proper steps aren’t in place.
One of the greatest advantages of retirement planning is that it gives you the platform to share your goals and intentions with those who are closest to you. This way, they’re fully aware of what’s to come and can help you work toward that vision.
Retirement Planning Made Easy
Although retirement planning is clearly important, we understand that it isn’t always easy. There are many nuances and factors that will ultimately affect where you begin, where you’ll end up, and how much you’ll be able to save along the way.
That’s why we’re dedicated to making this process as easy and stress-free as possible. We’ll work with you to develop a custom retirement plan that meets your unique needs. If you live in McClean, VA or Greater Houston, TX, contact Bogart Wealth today to discuss your wealth management needs.