Why Should People in Their Early 20s Start Retirement Planning Now?

Posted on

It's essential to start saving for retirement right from the point you get your first paycheck. Retirement planning is about understanding your retirement goals and making the necessary financial adjustments to fulfill the objectives. You'll have to:

  • Identify income sources and consolidate the figures
  • Know your monthly expenditure 
  • Have a savings culture
  • Manage financial risks and assets
  • Spend your earnings wisely

You can start a retirement plan at any time, but it's more fruitful when started earlier in your career. Retirement planning enables you to prepare for life when you stop working. With a sustainable retirement plan, you'll be able to decide when to stop working, where to live, and what activities lifestyle you'll have after retirement. Why should young adults think about retirement planning now? 

Time Is on Their Side

Young adults between the age of 21 and 35 might not have a lot of money for investments but have the time needed to let investments mature. The principle of compound interest works best for them because they have more time to let investments mature, which means they earn more interest. 

Take Advantage of Employer-Sponsored Retirement Income Planning

Because young adults at this age are usually employed, they should take advantage of employer-sponsored retirement plans. The most significant benefit is that your employer can match what you invest to a certain amount. For instance, if you invest 6% of your income, your employer can contribute a similar amount to your account. Always aim to contribute as much as your employer is willing to match when you're able to.

The Average Life Expectancy Age Is Rising

On average in the US, life expectancy is around 78 years. Think about your lifestyle, income source, and lifestyle when 78 and beyond. If you intend to retire at the age of 65, consider an income source that will sustain you comfortably past 78. 

Be Prepared for Future Financial Obstacles

Sickness, income loss, or lawsuits can significantly affect your income. Also, consider that many people, as they age, deal with life-threatening conditions that require expensive medical treatments. Without a good retirement plan, these financial obstacles can consume your savings, making you struggle financially in your later years. 

Also, understand that there is a lifestyle you're accustomed to. Changing that in your old age because you can't financially sustain it is stressful. Start taking small steps now to protect your future. 

Reach out to a professional who provides retirement planning services to learn more.