Why You Should Start Thinking about Retirement Now
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Why You Should Start Thinking about Retirement Now
Advanced and advancing societies around the world are grappling with an explosion of elderly people, stretching resources and money. How it will play out, we can only forecast. It’s a new phenomenon, and many governments have not taken action despite having done the math years ago. But if you want to ensure that you will live comfortably in your old age, you will have to start thinking—and sacrificing—early.
Things To Know
- Retirement may be a significant chunk of your life, and you may not be in great health.
- We often think of our future selves as though they were different people.
You should start thinking about retirement now because it may be a significant chunk of your life—maybe as much as a third. On top of that, you may not be in great health. One thing you do want is enough money to last until you die.
What your age says about your attitude
How you think about retirement will depend in part on how old you are. A 20-year-old thinks about it differently from a 60-year-old. Yet if the same urgency that a 60-year-old has were present in a 20-year-old, the latter would take it more seriously and plan for it better. We often think of our future selves as though they were different people (there are brain scans that support this), which makes planning for old age seem like planning for someone else’s future. But if you think of your future self as your own, planning for it would become more urgent and prioritized.
Don’t give up so soon
Often, when people hear the numbers that financial planners tell them they need for a secure retirement—say, $500,000 or $1 million—they give up and decide to party now and forget what lies ahead. But even setting aside small contributions (especially when matched by an employer) can add up over time and ease your anxiety. When you start early, you have the power of growth and compounding on your side. For example, setting aside just $40 a month in an account earning 5% starting at age 20 can get you over $108,000 in inflation-adjusted dollars by the time you are 60. And that’s just cash. You might also accumulate wealth in the form of property, collectibles, and other things that can be converted into cash. And besides that—your wages will likely increase as you age, enabling you to sock more money away. And if your employer can match your retirement savings, you just may hit that magic mark.
Isn’t this better than saying, "I can’t build up $500K, so I’ll just quit"?
Don’t forget to consider the risks of investing before you start.
The advantage of time
The earlier you start, the more time you have to benefit from the growth of your invested money; also, you have more time to recoup losses from the ups and downs of the marketplace. The older you start, the less time you have for all this, and the harder it will be to make your money grow.
Planning for retirement need not be hard. It takes some forecasting, some saving, and some periodic review of your plan. Hearing horror stories about Social Security and declining pension plans is enough to scare us into taking action, but should not be enough to scare us away from socking money away for old age. Budgeting your money can be easier if you can see it as a reward that will pay off when you can no longer support yourself.