Retirement planning is a crucial aspect of financial stability and peace of mind in your golden years. However, a common debate among individuals is whether it’s more beneficial to start early or if beginning later in life can still yield satisfactory results. In this blog, we will explore the advantages and disadvantages of both approaches, helping figure out what is the best decision for you.
Before we begin this discussion Let’s pay attention to why it is important to plan retirement.
The first and most obvious reason is financial security, that being said people need to leave the workforce earlier than expected, either because they can’t physically work, or because they’re burned out. The financial security of a sizable nest egg achieved with foresight and consistency will help you feel better about your finances in retirement. You won’t have to make choices from a place of desperation when you know that your individual retirement account or company retirement account is set up to take care of you and your family in the future. (Bowman, 2023)
The second reason is Medical Treatment, as individuals age, the likelihood of needing medical care and assistance increases. By accounting for potential medical expenses, seniors can safeguard their well-being and avoid unexpected financial burdens. It is essential to explore healthcare options, such as insurance plans and long-term care provisions, to mitigate any future healthcare-related challenges. (Considra Care, 2023)
One of the most important benefits of retirement planning is peace of mind. Ensuring a comfortable retirement is a top priority for many individuals. By engaging in comprehensive retirement planning, you can enjoy peace of mind knowing that you’ve taken the necessary steps to secure your financial future. Without the looming uncertainty, you can focus on enjoying your golden years to the fullest. (Vareesh Naik, 2024)
The Importance of Early Retirement Planning
Starting early with retirement planning leverages the powerful effect of compounding. When you invest, the returns generated create additional earnings. Over time, these earnings themselves earn more returns, leading to exponential growth in your retirement savings. This compounding effect becomes more significant the earlier you begin, allowing even modest contributions to grow substantially over the years.
Beyond the mathematical advantages, early retirement planning helps in establishing disciplined financial habits. Regular saving, prudent spending, and smart investing become ingrained behaviors that not only boost your retirement fund but also enhance your overall financial health.
Having a longer investment horizon means you can better handle market fluctuations and recover from downturns, ensuring the stability and growth of your retirement portfolio. (Plus, 2024)
Can I retire at 60?
Sixty is the most popular age to retire early, according to new research from Aviva which reveals the key steps people have taken to embrace early retirement and examines the costs and benefits of doing so.
The influence of money matters is also visible in people’s choice of early retirement age. One in five (20%) people targeting early retirement have set their sights on 55 to make the transition from working life. This is likely to be influenced by their ability to access their pension savings from this age.
Other key factors encouraging people to seek early retirement include reassessing their priorities and what’s important to them in life (23%), wishing to spend more time with family (20%) or finding they are either “tired and bored” of working (19%) or find it “too taxing and stressful” (19%). (Aviva, 2021)
According to a study conducted by Clever, a real estate data company, compiled 99 personal finance statistics based on multiple consumer surveys. The average retiree has $170,726 in savings — down from $191,659 in 2022. 22% of Gen Xers have nothing saved for retirement, and 43% regret not having saved more money. 71% of retirees have non-mortgage debt, with an average balance of $19,888. Nearly one in five retirees (18%) have medical debt, with an average balance of $10,259.30% of retirees rely on Social Security as their sole source of income. (Hicks, 2024)
A Middle Ground
If you don’t want to retire early for fear you’ll regret the decision, but also don’t want to wait so long that you miss out on the pleasures of retirement, there are ways to have the best of both worlds.
One example: You might try to negotiate a reduced work schedule with your employer and enjoy the life of a retiree on your days off, an arrangement that’s often referred to as “phased retirement.”
Finally, take some of those vacation days all at once. Do some of the major traveling to faraway lands you’ve always dreamed of. (Daugherty, 2024)
Conclusion
Retirement planning is a critical component of financial well-being, whether you start early or late. Beginning early provides numerous advantages, including the power of compound interest and reduced financial burden. However, even if you start late, there are strategies to help you catch up and secure a comfortable retirement. The key is to act now, regardless of your starting point, and make informed decisions to ensure a financially stable future.
REFERENCES
- Aviva (2021) Sixty the most popular age to retire early, Aviva plc. Available at: https://www.aviva.com/newsroom/news-releases/2021/12/sixty-the-most-popular-age-to-retire-early.
- Bowman, M. (2023) Why retirement planning is important, Anderson Business Advisors. Available at: https://andersonadvisors.com/retirement-planning/
- Daugherty, G. (2024) Early retirement: The pros and (mostly) cons, Investopedia. Available at: https://www.investopedia.com/articles/personal-finance/073114/pros-and-mostly-cons-early-retirement.asp#toc-a-middle-ground).
- Hicks, D. (2024) Top retirement stats for 2024, NRMLA. Available at: https://www.nrmlaonline.org/2024/01/05/top-retirement-stats-for-2024 (Accessed: 02 August 2024).
- Maryam Nasir Maryam is a leading writer at ConsidraCare (2023) Why retirement planning is important for seniors?, ConsidraCare. Available at: https://www.considracare.com/why-retirement-planning-is-important-for-seniors/
- Naik , V. (2024) 10 reasons why retirement planning is important, LinkedIn. Available at: https://www.linkedin.com/pulse/10-reasons-why-retirement-planning-important-vareesh-3nqef/.
- Plus, A. (2024) Early retirement planning: Securing your future lifestyle, ArgaamPlus. Available at: https://www.argaam.com/en/article/articledetail/id/1737242.
