According to The Principal Financial Well-Being Index, retirement planning is on the rise in America.
The survey points out that only 28% of workers aren’t planning for retirement, which is a drop from 32% in the previous quarter. This news indicates that more American workers are making efforts to plan for retirement.
Are you one of them?
The Sooner You Start, The Better Off You’ll Be
With investing and retirement planning, the sooner you start, the better off you’ll be. There are two main reasons that you should consider beginning your retirement planning as soon as possible:
1. Compound interest
One of the biggest reasons is compound interest. As your account balance grows, you earn interest on your interest. With investments, like equities, this principle also holds true. The more shares you have, the higher your balance — and you can buy more shares with the money you earn, using not only your capital, but your earnings, to make more money.
2. More time to recover from dips
When you start earlier, you have more time to recover from market dips. This can be a good way to improve your overall portfolio performance. Plus, the longer you’re in the stock market, the smoother your trend line looks. In other words, the longer you have, the less volatility you experience over time.
Starting your retirement planning early (and getting an idea of how much you need to set aside each month) can help you build up your nest egg more effectively. The sooner you start, the longer your money can work for you.
Indeed, starting out by putting a smaller amount into your retirement account when you’re in your 20s can be more effective than trying to play catch-up with a large amount when you’re in your 50s.
You can start small right now and begin building your retirement portfolio. Then, as your income increases, you can boost your contributions.
How Can You Start Retirement Planning?
The best place to start retirement planning is online. There are a number of retirement calculators that can help you figure out how much you’ll need in retirement (base it on your current expenses and go from there), as well as help you estimate how much to set aside each month to reach your goal. If you’re still uncertain, there are plenty of reputable financial planners who can help you map out your future.
If you want to enjoy a successful retirement, it’s important that you make it a priority now. Check into what tax-advantaged accounts you qualify for, as well as the limits with contributions. You can open a 401(K) at your work and an IRA on your own. When possible, make it a point to max out your tax-advantaged accounts so that your money grows more efficiently.
Have you started retirement planning?
Editor's Note: I've begun tracking my assets through Personal Capital. I'm only using the free service so far and I no longer have to log into all the different accounts just to pull the numbers. And with a single screen showing all my assets, it's much easier to figure out when I need to rebalance or where I stand on the path to financial independence. They developed this pretty nifty 401K Fee Analyzer that will show you whether you are paying too much in fees, as well as an Investment Checkup tool to help determine whether your asset allocation fits your risk profile. The platform literally takes a few minutes to sign up and it's free to use by following this link here. For those trying to build wealth, Personal Capital is worth a look.
- E*TRADE IRA - Official Site