Importance of Retirement Planning
Retirement planning is crucial for ensuring financial security and independence in your later years, allowing you to maintain your desired lifestyle without rely solely on government benefits or family support. It provides peace of mind by preparing for unforeseen expenses and increasing longevity.
You may be thinking, “Why is retirement planning so important? I won’t retire until years and years from now, right?”
Well, if you start planning and saving well for retirement now, you’ll be able to enjoy your retirement much more.
The best time to start planning for retirement is as soon as you can. Starting on a good retirement plan early can give you a variety of benefits during your old age such as:
Being able to stop working - eventually, as you become old, you will get tired of working or will have to quit due to health issues. If you have enough money saved for retirement, you will be able to stop working without needing a source of income.
Enjoying a good quality of life in your retirement - the more money you save, the more traveling and enjoyable activities you can do when you’re older. Also, since life expectancy is rising, retirement will last longer, which means you will need to save more to enjoy a better quality of life.
Having money to support yourself when health problems occur - as you age, you’ll have more risk of health problems. If you have saved a lot of money for retirement, you’ll be able to use it to pay for insurance, Medicare costs, and medications that you’ll need when dealing with health issues.
Not having to worry about your finances - you can avoid much anxiety and stress over money if you plan well for your retirement.
Not having to rely on Social Security payments - retirement can last 30 or more years of your life, and the IRS states that to retire comfortably, you may require up to 80% of your current annual income. However, the average monthly benefit paid by the Social Security Administration is only $1,200, which adds up to $14,400 of Social Security payments per year. The average annual salary in the United States as of 2024 is $63,795. If we go by the IRS’s statement, the average person would need $51,036 per year to retire comfortably, which Social Security benefits may not cover. That is why having a good retirement plan is so important.
We will cover more about retirement options and Social Security in the next sections.