In a world where inflation and future uncertainties are the only assured possibilities, planning for your retirement can prove to be one of your wisest decisions. Like they say – the best time to plan for your retirement was right after you received your first paycheque. The next best time is NOW. Let us discuss a few benefits of retirement planning at the right time.
Benefits of Retirement Planning
- Cost Advantage
Buying an insurance plan at the later stages of career and age attract higher premium charges. Therefore, you should invest in such insurances early in life. The sooner you buy, the lower will be the cost of the insurance premium.
- Better Opportunities of Compounding
Your investments can grow immensely, if you give them enough time. The power of compounding can work wonders when seen over a long horizon. You have a better opportunity to experience compounding effects if you invest in your retirement plan as early as possible.
Furthermore, with a better chance of compounding your investments, you might be able to create wealth not only for your retirement but also for your upcoming generations.
- Tax Planning
Planning for retirement gives you a foresight on tax planning as well. You get to know the various methods or plans to reduce your tax liabilities in the future. As a result, you will be able to diversify your portfolio among taxable, tax-free and tax-deferred investment products.
- Helps in Making Better Financial Decisions
Are you earning enough, or do you need extra cash? Can your present job fulfil your retirement goals, or do you need a second income source? You can easily address all these questions if you are firm on your retirement goals. A proper plan for your retirement helps you visualise your present status and relate it with your future needs.
Accordingly, you might be able to make rational decisions at present.
- Protects from Distractions
Planning for your future makes you financially disciplined. Once you know that you need to keep aside a certain percentage of your income for your retirement, you will refrain from spending money on distractions or avoidable items.
- Prepare for Unforeseen Expenses
Life is unpredictable; it always has been. You never know how or when a circumstance arises which requires you to spend a large amount of money. The list can be very long, whether it is the medical bill for you and your spouse, treatment costs, or funding higher education for your children.
However, you can use your retirement savings as a safety cushion in such circumstances to come out of the situation without stretching your finances.
Apart from the benefits above, a good retirement plan gives you peace of mind knowing that your finances will be robust and secure in your sunset years.
With good retirement planning, the only thing to worry about in retirement will be the outcome of the matches when your favourite sports team plays.