In the age of taking everything as it comes and living in the moment, the one thought that most people put off for later is retirement. Early on in their professional career, or even a few years into it, retirement is more often than not the last thought on people’s mind as every other expense and financial detail takes a priority.
Starting the planning for your retirement early on in your career comes with a number of advantages, some of which have been discussed in the following sections.
1. Lower premiums
One of the biggest advantages of starting your retirement planning early is that you get to start with lower premiums on the different investment policies that you select. With age being on your side and the term of these policies being long enough to offer higher returns even if you don’t opt for higher premiums, investing in different options with one eye on retirement can prove hugely beneficial. Most people avoid investing in schemes for their retirement in their 20s and early 30s because of their income being lower and the perception that they should be thinking of securing the present before anything else. However, starting on the investment path early on in your life helps you start with premiums that are not very high, which means you get to plan for a financially secure retirement without having to compromise heavily on the needs in the present.
2. The power of compounding
Investment portfolios and savings accounts, both operate with compound interest, which is a huge benefit if utilized right. By planning and starting to invest and save for your retirement early in life you are giving your money a better chance to grow without having to set aside exorbitant amounts to achieve the financial goals for your retirement. When it comes to the power of compounding, people starting early have a distinct advantage over those starting later. While both can reach the same amount in terms of returns and total funds, the people starting early can get there by investing a lot less as compared to the people who want to start investing later in their life.
3. Get into the habit of investing
Along with the other benefits, starting the planning for your retirement early gets you into the habit of saving and investment, which can help you a great deal over the years. Getting used to investing and saving early on in your life is extremely important since it becomes a lifestyle and helps you secure your family’s future financially. On the other hand, if you get into the habit of spending everything you earn, that becomes a dangerous lifestyle practice which can come back to bite you years down the line. Apart from getting into a habit of investing, starting early also brings the advantage of better investment knowledge. Most people are not very good with reading the investments in the first few attempts. Starting early gives you the benefit of time to learn about the investments and take definitive steps without getting too overwhelmed with planning everything at once.
4. Saving for the bad times
By choosing to plan your retirement early, you are not only making your post-retirement future secure, you are also preparing for unforeseen events that can result in a financial hit if you are not well prepared. The funds and investments that you have set aside for your retirement can also help you in times of emergencies if need be. Apart from that, in the worst case scenarios, you can also use your retirement policy or funds as pledges to raise a short-term loan.