The Benefits of Retirement Planning: Why Should You Plan Ahead?
Whether you like it or not, you will age, and retirement planning is a process that you will need to face at some point in time. And with the ever-fluctuating future of Social Security and other government and pension plans, it is important that you start and know the benefits of retirement planning process as early as possible.
5 Benefits of Retirement Planning
But why? If you are still unsure about starting a retirement plan, here are 5 benefits of retirement planning to convince you just how important it is.
Enjoy Tax Benefit
In most cases, a retirement plan offers tax benefits that other people are unaware of. You can have a Roth 401 (k) or a Roth IRA when you plan for your retirement so be sure to ask your adviser for more details and information about these. You will not have to pay taxes on these types when the money is disbursed. While a traditional IRA offers an immediate tax benefit, you will still need to pay taxes when taking out the money in retirement. Also, it offers you tax benefits for later thus, giving you tax-free retirement savings.
Take Advantage of Compounding Interest
The earlier you begin saving and planning for your retirement, the more you can reap benefits of compounding interest. Compounding interest is an interest calculated on the sum of initial principals and on the accumulated interest of previous periods.
Assuming a 7% interest, if you invest $5,000 annually, then from the age of 25 to 65, you could grow that sum to more than a million dollars with the help of a compound interest.
Enjoying Independence During the Golden Years
For your entire life, you have been working and planning your retirement. And now, it is time for you to sit back, enjoy and relax what the world will offer you and do the things that you cannot do years ago.
In order to enjoy such life, you need to plan your retirement and start saving so that you will have the fund to enjoy your golden years. With a retirement plan in place, you can prevent financial reliance on the government and your family for the years to come.
Peace of Mind
This is by far the most important benefit of retirement planning. Planning your retirement earlier not only helps reduce stress during your retirement but also the years that lead up to your retirement age. Without a retirement planning, you will be left in a cloud of uncertainty and can produce an unnecessary level of stress in your life.
Plan for unexpected expenses
In your life, there could be many situations or reasons that will require you to spend a large sum of money. It can be a treatment cost or medical bills for some illness and other unforeseen financial needs of your family. With a retirement plan, the corpus that you have built will also serve as a safety net that can help save you in such unpredictable situations.