11 Reasons to plan for your retirement
1. Lower the impact of market volatility
A great reason to start planning for your retirement early is that your lengthened exposure will likely lessen the potential effect of market downturns. Events like the 2008 market crash and the volatility we experienced because of covid are very fresh in our minds. Though intimidating, the S&P 500 had returned to its former high by 2014. The flash crash of 2020 was largely over by September of that year. You may have heard some variation of the phrase “Time in the market beats timing the market” and these are great examples of the truth in that phrase. To someone only years from their retirement these swings can be frightening, but to a twenty-five or thirty-five-year-old, they can be simple bumps in the road.
2. Pensions aren’t what they used to be
You can’t count on pensions in the way you used to be able to. According to the Department of Labor’s Employee Benefits Security Administration, pension plans offering guaranteed payouts fell an astonishing 73% from 1986 to 2016. What was once a cornerstone of retirement income is now becoming an employment benefit of the past. However, as pensions disappear, we can see a rise in benefit plans such as 401(k)s. These kinds of plans require more involvement on your part, so it’s good to know how to best approach them. Having a retirement planner to advise you on this is just one of the many benefits you can expect when employing their services.
3. You never know what the future holds
If the future is anything it is uncertain. We never know what cards may be dealt to us, and although the future can hold many great things, we never want to be unprepared for the misfortunes that may befall us. It could be the repairs your house needs, or the medical bills for an accident, but being unprepared for these things will only exacerbate the harm done to you. Unexpected expenses are all but guaranteed to happen, be prepared for them, and minimize the impact they have on your life and finances.
4. Lessen your stress and improve your health
Another great reason with respect for your health is how effective retirement planning lessens the stress in your life. According to the American Psychological Association money is the biggest cause of stress in the United States. We know that with stress comes a vast assortment of negative effects from irritability to withdrawal, and even head or chest pains. You want your retirement to be as enjoyable as possible, so why sully it with the negative effects of stress. A key element of retirement planning is having a firm grasp on the money you have and the money you know is coming in. This powerful knowledge can do wonders for easing your financial worry.
5. People are living longer than ever
Thanks to medical advancements and our continually growing knowledge of how to lead healthier lifestyles, people are living longer than ever. Nowadays it isn’t unreasonable to expect to live 20 even 30 years into your retirement. While this is a blessing in getting to spend more time with the people we love, it can be a source of stress as we need to plan for an even bigger nest egg for our retirement. A longer retirement demands to be planned with even more care. The earlier and more meticulously you plan for your retirement the more you will be prepared for its longevity.
6. Increase your benefit from compound returns
The greater amount of time you spend contributing to your 401k, an IRA, or participating in the market increases the benefit you will receive from compounding returns. By saving in a retirement account, you stand to possibly gain on your principle through compound growth. Let your money work for you without you working any harder.
7. Don’t be wholey dependant on Social Security
You can’t guarantee that Social Security will be enough. It seems that year after year we hear more and more grim news as to the dissipating funds of the program. Throughout our entire lives, we pay into Social Security. You would hope that there will be enough to provide for you in your retirement. This however is not written in stone, and although there are strategies to maximize your social security benefits, a litany of factors is working against you. From increased stress on the system to rising inflation it’s best to have extra funds stored away for your retirement.
8. Practice your financial discipline
Financial discipline is a skill, a skill that is becoming much less common in our era of instant gratification. Like all skills, it takes practice to become a master. Planning for your retirement is an amazing place to practice your financial discipline. A place where you can reap the benefits in multitudes down the line. Starting somewhere simple like putting away $100 dollars a week, will make you more conscious of your financial decisions in all facets of your life. You might find it feels better to put away more for your retirement than it does to eat out a few more times each month. There are so many small factors just like this one that deserve observation.
Adjusting across a broad spectrum of your financial choices can net massive windfalls in your future. For example, let’s say you go out to eat once a week. Being mindful of your finances you decide to change that to once every other week; you spend an average of $50 dollars on nights eating out, this decision would save you $36,000 over 30 years. Now imagine how much you could save looking at all the little expenses you could cut back on.
9. Save money on taxes
Saving on your taxes will be another massive source of saved income. When you contribute to a 401(k) or a traditional IRA, you reduce your taxable income for the year. There is also have the option to contribute to a Roth IRA or Roth 401(k). Here your money will be taxed before you contribute to the account, not when withdrawing your funds. A retirement planner can offer advice on these strategies and more. As our CEO and President Alexander Joyce put in his book ReJoyce In Your Retirement, “You will make more money saving on taxes than you will be making more money”. You can get your complimentary copy of ReJoyce In Your Retirement here. It’s filled with plenty more information on how you can plan for your retirement.
10. Retire earlier
A benefit well worth the wait will be earlier retirement. You can earn this for yourself by being diligent in planning for it. For many, retirement is a goal we work our entire lives to achieve. It doesn’t matter how much someone loves what they do. Being in the workforce for 30 to 40 years can begin to feel tedious. Early retirement sounds delightfully enticing for so many because of this. We can’t be guaranteed that financial planning will bring us an early retirement, but we know it can’t hurt.
11. Pass more on to those you love
Lastly, we can think of what we leave for others. Many of us worry about what we can do for those we love once we have passed. It’s hard to think about how we can help without our physical presence. An estate is often the most we can do for those we leave behind. Many retirement planners such as ReJoyce Financial, offer estate planning services to their clients. You can be assured that great care will be taken to make sure your loved ones receive as much as they can, and what is given to tax collectors is minimized. All the planning you have done can lead to a bigger nest egg and a bigger inheritance to those you care about. Planning for your legacy starts with planning for your retirement.
About ReJoyce Financial
We are an independent and fee-only retirement planner located in beautiful Carmel, Indiana, serving Indianapolis and its surrounding communities. We would love for you to schedule a consultation so we can help you make the most out of your retirement.