The Reasons and Steps for a Strong Retirement Plan

Retirement piggy bank

Before we begin discussing why you need to have a retirement plan, you first need to comprehend why you need to take ownership of your retirement plan. One thing is certain; we cannot rely on others to provide a long-term solvency for our futures. At the end of the day it is your future. The first obligation is to you.

Why do we need a retirement plan?

This may seem like a trivial question, but you would be surprised to learn how people are very cavalier about this situation, especially when you are young. For some people, they live in the present-day where the only responsibilities they have are going on around them. Having this type of mentality, while liberating, can be incredibly damaging to you and your future. The truth is that the older we get, the more responsibilities life will pile up on us. With this never-ending rollercoaster, the stability of your golden years needs to be certain. That is why it is vital that you have strategically mapped out an overall retirement plan in which you can build up every single year.

So how do I save? Do I just put a dollar in the penny jar and call it a day? As simple as this sounds, the overall concept is correct. First and foremost, start off with a goal in mind. Ask yourself a series of questions of what you are looking for when you retire. Do you want to travel all across Europe? Do you want to stay in and take care of the grandkids? Or do you want to just read all day and enjoy the rest of your years? Having answers to these specific questions will motivate you to keep saving. If you have a goal in mind, it will usually force you in a habit to save at a timely manner.

Once you have that goal in mind, start saving. The best advice is to simply start off small. If possible try and increase that amount. The sooner you start saving, especially in large quantities, the more time your money has to grow. Make this a priority. Devise a strategic plan and be consistent with it.

In addition to staying consistent with your work, analyze the cost and expenses for your dream retirement you. This goes hand-in-hand with keeping a goal in mind. While everyone may have a different view of how they want to spend their retirement, the one thing they can agree on is that retirement is expensive. They are not wrong. Experts estimate that you will need at least 70 to 90% of your preretirement income to maintain your standard of living when you stop working. Being aware of the exorbitant amount of these expense will help you frame how much you have to save per month and how long you will be saving.

To help aid you with this cost, try and contribute to your employer’s retirement saving plan. For most companies, your employer will offer a variety of retirement saving plans such as a 401K. Make sure you sign up for these plans. While they cannot fully compensate everything for your golden years, it will provide a strong cushion later on down the line.

Last thing you need to be aware of is to not touch your retirement savings. As much as consistency can be a problem for some people, leaving your retirement alone is its own entity. If you withdraw from your retirement savings, you will be losing more than what you have invested such as tax benefits and withdrawal penalties. Regardless of the situation, leave your retirement plan alone. It is easy to fix a situation. But it is not easy to fix your future.