Monday 11 September 2023

What to Do If You Haven't Started Saving for Retirement Yet

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It sounds a bit scary to think about it, but when you get your first job, you should immediately begin saving for retirement. While the recommended age years ago was 25, with the shifts in the world like inflation, it seems like everyone needs to start sooner rather than later. But what if things kept happening, bad financial circumstances where you were living payday to payday and really couldn’t get enough money to put back for retirement? It’s terrifying, but things like this do happen. But what do you do if you haven’t started saving for retirement? What can you even do to help yourself? So, here’s what you need to know!

Is It Ever Too Early to Plan for Retirement?

Absolutely not!  Honestly, there’s no such thing as planning too early for retirement. You need to keep in mind that you’re never going to know when you need to retire. Sure, early retirement is a dream for so many people, but you need to keep in mind there are some that are forced into it due to health-related issues, years, maybe even decades earlier due to health-related issues. 

Can you imagine having to retire early all due to being forced into it rather than actually wanting it? So, not it’s never too early to plan for retirement because you never genuinely know when you might be able to actually have to retire. It could be years earlier than planned or even years later; it’s hard to say.

What Are You Able To Do If You Begin Saving for Retirement Later in Life?

No matter what age you start saving for retirement, it’s not exactly ever too late. If you’re in your 40s, you can still save up for at least a couple of decades, which will help you out so much. The same can be said if you’re in your 50s; that’s at least a decade of saving up. Some people have the luxury of a mutual fund or an annuity that they can immediately put towards retirement, while others don’t exactly have that option.  But in the end, it’s almost never too late. But here are some things you can do to help ensure that it’s not too late. 

It All Starts with Assessing Your Financial Situation

The first step to take when you haven't started saving for retirement is to assess your current financial situation. Create a comprehensive overview of your income, expenses, debts, and assets. Knowing where you stand financially is crucial for developing a retirement savings plan that suits your needs.

You Need to Have Clear Goals

This means getting really upfront and personal with yourself, no matter how uncomfortable it actually might be for you. Ask yourself questions like, "When do I want to retire?" and "What kind of lifestyle do I envision during retirement?" Having specific goals will help you create a realistic savings plan. This plan doesn’t need to be 100% set in stone, as some retirement plans change, like getting a huge salary at work or something positive like that (or even negative). But it’s more about having goals, a realistic goal, and how you plan to get there. 

Does Your Employer Have Sponsored Plans?

If your employer offers a retirement savings plan, then try to enroll as soon as possible. These plans often come with employer-matching contributions, which can significantly boost your retirement savings. Contribute at least enough to maximise your employer's match; it's like getting free money for your retirement. If you’re running your own business then this might not work out as well.

Try to Increase Savings Over Time

This doesn’t mean working more hours at work, but it might mean picking up a side hustle and all of that money going directly into this retirement plan. You’ll want to start by saving what you can comfortably afford but aim to increase your savings rate as your income grows or your financial situation improves. Incremental increases can have a substantial impact on your retirement nest egg over the years.

Try to Invest Wisely

For a lot of people, they’ll try to make investments to help them with retirement, especially if they started fairly late. Some invest in stocks, others invest in a business, and more people are opting to invest in real estate. Overall, investing is a key component of growing your retirement savings. You might even want to consider seeking advice from a financial advisor or utilizing automated investment platforms to make informed investment decisions. 

Investment can technically help, but at the same time, it can also hurt you. There’s never a true guarantee when it comes to investments; sometimes, they’re just too volatile. So, be wise about your investments because there might be that chance it all backfires.

Patience is Key

No one wants to hear this, but it’s true; you have to be patient and just work through this. Building a substantial retirement nest egg takes time, patience, and discipline. Stay committed to your savings plan, even when facing financial setbacks or market fluctuations. Avoid the temptation to dip into your retirement savings for non-essential expenses. Sure, it’s so hard not to be stressed out with such a major thing, but you’re going to have to.

Consider Seeking Advice from Professionals

As stated earlier, it might be a good idea to talk to financial advisors when it comes to investments, but when it comes to financing in general, it still might be a wise idea to talk to one. There are professionals who focus solely on retirement planning, and they have experience helping older folks who never got the chance to investment in this. They can help you out. They can help you develop a personalised retirement strategy based on your unique circumstances, goals, and risk tolerance. In the end, sometimes, the best thing you can do is to go straight toward the professionals to help you out. 

Why is there an Urgency for Saving for Retirement?

It’s not only about saving for retirement; it’s about ensuring that you’re not starting too late when it comes to all of this. Retirement is never that distant, it seems like it, but time does fly, and while time flies, you need to save up. So, here’s why you need to consider that there truly is a sense of urgency when it comes to retirement. 

There’s the Power of Compound Interest

One of the most significant advantages of starting your retirement savings early is harnessing the power of compound interest. Compound interest allows your money to grow not only on your initial investment but also on the interest and returns it earns over time. The longer your money has to compound, the more substantial your retirement nest egg can become. Starting early gives your investments more time to grow, making it easier to reach your retirement goals.

There’s Always Going to Be Uncertainty

You might see yourself working in the same company until retirement, something that’s very Baby Boomer-oriented, but nowadays, companies die, they lay off thousands, and even some of the strongest companies lack a strong future. Even if you own a business, you’ll never actually know what the future can bring; no one can actually see the future. Don’t rely on just one solution because that one solution might actually not work out. There’s urgency for saving for your future because you don’t know what your future will even bring.

Inflation Keeps Happening

It’s never going to go away, and it’s questionable how long this high inflation (that’s currently happening) will even stick around. Inflation erodes the purchasing power of your money, meaning that the same amount of money will buy less in the future. There very well might be a chance that inflation will just keep on happening and will keep on getting worse.

You Deserve to Not Feel Stressed About the Future

You want to feel like you can put yourself in good hands; that’s so important. Starting your retirement savings journey early helps alleviate financial stress in the long run. You'll have a sense of security knowing that you are actively working towards a comfortable retirement. This can positively impact your overall well-being and reduce anxiety about your financial future.

There’s a Rise in Life Expectancy

Specifically life expectancy, not health expectancy. You honestly never know when your health will do south. It might be when you’re young, it might be when you’re old, and well past retirement age. You can diet and exercise now, something you should do. But genetic diseases could get in the way, accidents could happen, you just never truly know, and that can put a wrench in all of your plans. 

Plus, a lot of countries are pushing the retirement age further due to the fact that life expectancy has extended greatly.  Starting to save early allows you to build a more substantial nest egg to cover the potentially extended duration of your retirement.

At the end of the day, you don’t know what your future will look like. You have an idea of what you want it to look like, but it might actually not look like that, and that’s something you have to keep in mind.