Retirement Planning, Necessary or BS
“Retirement!”
Strikes a chord, right? Planning for the autumn of your life, having a well-structured retirement savings plan and saving for the rainy days in your old age while you could use up those savings to settle pressing needs at the moment – sounds a bit murky. Doesn’t it? Why don’t I just subscribe to the retro norm of every “old gee”; wait for that cheque from social security to land in my mailbox and voila! I’m sorted out financially. You probably fall into that category, don’t you?
But hey, newsflash! We are all victims of these myriad of excuses we give ourselves as youths regarding retirement planning. The current plan deployed by many is to spend what you earn, save as little as possible and fall back on social security in the future. Well, that is a carefully calculated plan tantamount to financial incarceration. Well, I am here to remove that veil from your eyes, to strategically rewrite the status quo and to provide quintessential information needed to understand the keys to potential financial freedom on the retirement planning coin.
What then is retirement planning?
Retirement planning according to Investopedia, refers to the financial strategies of savings, investments and ultimately distributing money meant to sustain oneself during investment. It is the process of setting retirement income goals in order to ensure financial security and financial independence in the future. In essence, retirement planning aids the individual in preparing a steady stream of income once the autumn of one’s life is reached. Every retirement plan is unique with its associated benefits and it is essential to have a retirement plan well designed to suit your individual preferences and needs.
It is a twisted notion to think social security and the pension scheme would pay you off once you hit retirement. Think about it, would that amount suffice to settle all the expenses you’d incur? Do you envisage yourself depending on family and friends for financial freedom once your cheque from social security or the pension scheme delays?
That’s definitely not the plan we would want to have for our lives as youth, right? The road to retirement may be a really long journey and feels even longer for someone just at the inception of their working years, but hey, there are a thousand and one reasons why retirement planning is particularly important for young people.
Top Five (5) Benefits of Retirement Planning
Now let’s cut to the chase! What are the merits of planning for your retirement?
1. Financial security
Financial independence is so liberating. Having the ability to settle pressing needs, treat yourself, start a business, invest and invest even more especially at your old age without having to seek for financial help sounds like heaven on earth. This is principally one of the reasons why we must consider retirement planning in our prime. It is essentially within this time frame that we are able to save and invest even more aggressively than people nearing retirement, because we have a longer period to invest and to withstand the ups and downs of the financial market. More so, pension scheme and social security, especially in these harsh economic conditions isn’t really as reliable as they used to be so it’s best to prioritize financial independence.
2. Tax Benefits
Everyone wants to escape taxes (GRA giving side eye). Ever heard of a 401(k) plan? Well, a 401(k) plan is a workplace retirement plan that allows its employees to make annual contributions up to a certain limit. It is predominantly one of the smartest investments with the greatest tax benefits. With this type of account, the contribution to that account is normally deducted from your pay slip. These funds are deducted even before taxes are imposed and that makes your contribution tax-free, in essence, you reduce your taxable income. Over time, compound interest and tax deferrals make a huge difference in the sum of money you will accumulate within the period of saving. You get to pay the taxes only after you decide to withdraw money from that account. It’s highly suggested that, that account isn’t touched until retirement knocks on your door.
3. Shield From the Harsh Effects of Inflation
It is a well-established fact that inflation is the rate of increase in prices of goods and services over a given period of time. We all know inflation increases our standard of living and decreases our purchasing power as consumers due to the increase in the prices of goods and services. Now how does a well-structured retirement plan shield us from the effects of inflation in the future? As individuals we must be emergency-ready whenever we are caught in tight situations. Having a retirement plan, which includes investing and growing your money judiciously would help you beat inflation in the future. When prices are galloping and standard of living is high, your retirement plan will help you cover your post-retirement expenses.
4. Returns for Your Lifetime
Having a retirement plan such as an annuity plan, furnishes you with returns for your lifetime. An annuity plan is a financial product that provides guaranteed regular payments for the rest of one’s lifetime after making a lump sum investment. Having regular payments for the rest of your life? I say this sounds like financial security and independence! You have the option to either invest periodically or as a lump sum; whichever way works for you, and be financially independent for the rest of your life.
5. Attend to Medical Emergencies
The increase in the cost of healthcare, primarily, is pivotal to understanding why we must have a retirement plan. As we age, our immune system weakens and makes us susceptible to diseases. Most retirement plans cover health insurance and this means, your healthcare and regular visits to the hospital will be entirely catered for. These healthcare benefits include coverage for dental care, vision, prescription of drugs, extended healthcare and possibly life insurance. But note, these benefits can only be enjoyed depending on the type of retirement plan you subscribe to.
There are a thousand and one reasons why the youth should have a retirement plan. “The Soft Life” is everyone’s dream. Why don’t you secure your future with a retirement plan and enjoy all the goodies life has to offer.
And remember “Retirement is not the end of the road. It is the beginning of the open highway and that journey must be enjoyed.”
Emmanuella Amoah Boadu