Recent surveys say that around 15% of Americans have nothing saved for retirement. They don’t have anything in the bank, let alone a retirement plan.
It is not surprising, considering how many people are living paycheck to paycheck. And for some, retirement seems too far in the future to think about. But unless you are sitting on literal millions, having a sizable retirement income is so important.
And if you are of working age, the only wrong time to start a retirement income account is never. It is not too late to prepare for your future.
Are you still wondering if you really need to make a retirement plan? Read on to understand exactly how important it is.
You Could Live Well Beyond Retirement Age
The current retirement age for people in the US is 66 years and two months. And for those born after 1960, it is 67 and will increase from there.
So, how likely is it that you will live long beyond that age?
Pretty likely. The average life expectancy for an American citizen is over 78 years of age. And if you are middle-class, don’t have any major health concerns, and do not smoke, it is even higher.
Let’s say you live until 82 years old which is 15 years after retirement. With an average retirement income of around $20,000 per year, that’s $300,000 in total.
What if your retirement goals state you need more than $20,000 per year? And what if you live 10 years longer? You cannot know when you will meet your maker and, if you want to be optimistic, you should plan to be around for a long time.
Social Security Is Not Enough to Live Off
One of the biggest arguments in favor of not saving for retirement is that people plan on living off their social security. It is by far one of the biggest retirement planning mistakes.
You can claim some retiree benefits when you are 62 but you do not get your full benefits until you are 70-years-old. So if you wanted to retire early, that is not an option.
In January 2021, the average social security benefit was $1,543 per month. The highest is $3,148, but it is obvious that most retirees get nowhere near this amount.
Could you live off $18,516 a year? You likely don’t right now, so it is unlikely you will when you retire.
Finances Are a Huge Form of Stress
An increase in financial obligations is one of the biggest stressors in everyday life. Almost all adults worry about money. And not only retirement income but debt, mortgages, car payments, and other expenses can all contribute to this stress.
If you do have a lot of extra expenses, saving for retirement might be at the end of the list. This can also cause stress between spouses if you have different financial priorities.
Does this sound familiar to you? If so, avoid burying your head in the sand and hoping the problem will go away. It won’t.
Instead, talk to a professional advisor who can help you and your partner with financial planning. One way or another, you will need to pay your expenses and you will need to retire. So, it is better to organize your finances now so you can remove that huge source of stress as soon as possible.
Saving for Retirement Means Paying Fewer Taxes
Have you ever thought about how lowering your taxable income, by putting money into a retirement fund, will reduce your taxes?
Ah, now you are paying attention.
No one likes paying more taxes than they need to pay. But that is exactly what you are doing by not investing in yourself and saving for retirement.
If you have a 401(k) plan with your employer, this is a great start. You could also open a Traditional IRA or Roth IRA and investing in index funds will help you avoid certain taxes once you do retire.
Life (and Work) Is Not Predictable
Retiring early might be a dream come true for some, but not for others who do not have the financial means. Did you know you might not have a choice and you might have to retire early?
Thousands of companies forced employees in their 50s and 60s to retire early in the pandemic. And even before 2020, forced or unplanned early retirement was not as uncommon as you might think.
Health problems become more and more common the older you get. You may develop a chronic issue that puts you out of action for the rest of your working life. You cannot rely on being able to work until you are 70 as life, by nature, is impossible to predict.
You Can Enjoy Your Retirement
This might be a wild suggestion, but the most important reason why you should have a retirement plan is so you can enjoy your retirement.
At long last, you do not have to wake up at a ridiculous time in the morning and commute to your cubicle. You do not have to drink instant coffee and do small talk with Dave from human resources who always lingers in the hall.
You can go on vacation without asking for anyone’s permission. You can spend Tuesday afternoons baking cookies with your grandkids. You can eat lunch on Fridays with friends.
And when you reach very old age, you will not be a burden to your own children as you will be able to pay for your own care.
You spent decades in the workforce paying your dues so make sure you save enough so you can reward yourself for all your hard work.
Get to Grips With Your Retirement Income Today
Thinking about your retirement income and financial planning for success is not exciting but it is 100% necessary. It will lower your stress and guarantee you will have an enjoyable and happy end-of-life experience.
Want more financial advice so you can prepare for the future? Our website has tons of great tips to help your bank account thrive!
