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When to Start Thinking About Retirement

When to Start Thinking About Retirement

| December 21, 2023

If you’re working, now is the time to start thinking about your retirement.

You may believe getting ready for retirement happens late in your career, perhaps in your 40s or 50s. But your preparations for leaving the workforce should start with your first paycheck, depending on the lifestyle you want later and how long you expect to live.

If you’re like most people, your focus has been on when to retire — bailing out early at 55, seeking early Social Security benefits at 62, or delaying your last day of work until 70 or beyond to increase your benefits.

However, to ensure that you reach retirement with the money you need — no matter when it happens — you should think about the kind of life you want to lead later and the length of time you might remain alive.

Those considerations might seem too far in the future for someone who’s 18, 25, or even 40. Even so, there are benefits to getting a head start on retirement.

Learning to save at a young age is a skill that will stay with you throughout your career, and putting money away early gives your money longer to grow to achieve your retirement goals.

Plan for Your Future

No matter when you start thinking about retirement, there are many questions you need to answer. First among them: What do you want retirement to look like?

Do you want to spend lots of quiet time at home with family and friends, or do you fantasize about traveling? How much money will it take to do what you want for as long as you want?

Answering these questions, and others like them, will allow you to lay down a map of where you’re going and understand the cost of following that road into retirement.

If you plan well, you’re more likely to enjoy the future you imagine after years of punching the clock. Consequently, your retirement planning should begin with deciding what you want your future to look like once you no longer have to work.

From there, you need to sit down and figure out where you are financially and estimate how much money you’ll need to retire.

According to the 2023 Retirement Confidence Survey from the Employee Benefit Research Institute and Greenwald Research, only 64% of Americans believe they’ll have enough money to last them through retirement, down from 73% in 2022.

If you’re just setting out in the workforce, it’s important to take certain steps to ensure a sound financial future: set a budget, keep solid financial records, find out about your employee benefits and take advantage of them, learn about compounding, and stay or get out of debt as soon as possible.

4 Key Questions to Estimate Your Retirement Needs

There are four big questions to ask yourself to kick off financial planning for your retirement:

  1. How long do I expect to live?
  2. What are my sources of income?
  3. What kind of saving and investing am I doing?
  4. What might the economy be like when I retire?

Some of these questions may be more difficult to answer than others. However, they’re all essential for laying the groundwork for a happy retirement.

Save and Invest for the Future You Want

Getting an early start on saving and investing is the best way to arrive at retirement on schedule and with the peace of mind that your money will last as long as you need it to.

Saving is simple in principle — simply spend less than you earn. Your goal should be to live below your means. It can be challenging, but you should try to squirrel away 15% of your paycheck before paying for anything else, living off the remaining 85% every month.

Additionally, take advantage of your employer’s 401(k), ideally allowing the company to deposit your money in the 401(k) automatically. If the company you work for matches employee contributions, make sure you contribute as much as possible to make the most of the scheme.

Other investment opportunities include traditional and ROTH investment retirement accounts (IRAs) and stocks, bonds, and mutual funds outside retirement accounts.

Again, there are advantages to getting started with investing in your 20s. You can afford to be more aggressive when you’re younger because you have more opportunities over time to recoup losses. As you move closer to retirement, you can switch to more conservative investments.

Seek Trustworthy Financial Help 

Whether you’re 18, 64, or any age, your retirement journey should start right now. Consult a qualified financial advisor at Good Life Morehead City to get the help you need to set the stage for a secure, financially successful retirement.