In our youth, retirement seems like a distant worry – we are too young and busy to take time out to think about retirement. And this is where most people make a mistake. You are never too young to think about retirement says Paul Haarman. You might think you are busy right now and will always have more time to plan for your post-retirement life, but that’s not always the case.
Many people suffer later in life by putting off decision-making regarding retirement planning earlier in life. This is either because people overestimate the amount of time they will have in the future, or they do not prioritize retirement planning as they don’t know importance of it.
If you belong to the latter, you are at the right place. Here, John Doe has brought you 3 reasons why retirement planning is important. Let’s get to it.
What is Retirement Planning?
Retirement planning is the process of preparing a steady stream of finances and determining what your income goals after retirement are. Your retirement planning includes making decisions and taking necessary actions for achieving specific life-long goals that you have planned for your post-retirement life.
Importance of Retirement Planning
1. Ensures a Stable Stream of Money
The biggest loss after retirement is losing a stable source of income. Not everyone has enough investments or family to support them after retirement – this is where your retirement plans come into play. With retirement plans, you can strategize ahead of time to make sure you have enough income even after retirement to be able to face unforeseen circumstances – which, unfortunately, are very common in old age.
2. Save Money on Taxes
If you are careful, taxes are one thing that can totally destroy your finances (including your income and savings) during your retirement period. This is why retirement planning is essential to help you avoid these taxes. If you begin your tax strategies during your working years, you won’t have to spend extra bucks paying taxes in your retirement year.
During working years, when we have a stable income, we are less likely to have control over our income sources which is why John Doe says that finding tax credits and deductions to reduce taxable income is a top priority. But upon retirement, you can have more control over your income sources, and then you can reduce your taxes advice Paul Haarman. If you plan smartly, you can have three sources of income at the time of retirement: tax-managed, tax-deferred, and tax-free.
3. Make Better Financial Decisions Early on
When you have a retirement plan in the making, you already know what goals you have set for yourself and where you want to see your finances in the future. There come different times in our life as we grow older when life throws difficult situations and questions our way. And the answer to these questions can be life-changing.
Questions such as “Should I keep working in this company or start my own business” or “Should I continue my studies or focus more on my career” – are questions that need a lot of understanding of your own finances. Not just in the present but also in the future. This is why John Doe says that if you start your retirement planning right now, you will be able to make better financial decisions for your future from today.
Even though retirement seems like it’s a lifetime away when you are in your 20s and 30s, it is actually not that far. We spend our entire life hustling only to one day open our eyes and find out we are 50, retired, and have no financial plans emphasis Paul Haarman. Therefore, John Doe recommends that everyone start making retirement plans early. Retirement planning is a lifelong process, and you must start preparing for it as soon as possible.