David Haass is CTO and co-founder of Elite Insurance Partners and MedicareFAQ, a learning resource center for all Medicare beneficiaries.
The effect of compound interest is one simple reason why it is crucial to get an early start in retirement planning. However, beyond simply growing your financial savings, it’s important to consider what that will mean for your retirement.
It’s difficult to enjoy your golden years if you don’t have the funding to do so, and just as important are the varying expenses with which retirees have to contend. You will require sufficient funds to cover everyday costs and fund your retirement adventures.
When you save earlier, you’ll enjoy a larger nest egg. But what that truly means is that you’ll have a better quality of life and more security throughout your retirement. Let’s look closer at how getting started saving early will help you get the most out of your golden years.
Healthcare Expenses Are Only Rising
The U.S. is already spending a collective $4.3 trillion on healthcare, and these figures are slated to continue to rise over time. This means you can expect to pay more as you age, and the hit is across the board. From prescription drugs to medical procedures, you’ll need to save more to cover your costs.
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The average life expectancy for an American is between 76 and 77-plus years, while the full retirement age for Social Security is increasing to 67 for people born in 1960 and later. Thus, it is wise to build up at least 10 years of savings, considering factors such as inflation.
Many things can help, such as Medicare benefits. But even when you use Original Medicare (Medicare Part A and Part B), several costs can persist. These costs can be covered through Medicare Supplement plans, also known as Medigap. However, you’ll need to cover the monthly premium.
Substantial retirement savings can also mean having access to better healthcare altogether. As we age, we likely have more healthcare costs, so it’s important to properly arrange your finances.
Maximizing Your Free Time
Retirement will look different for everyone. However, if you don’t have enough funding to fuel your dreams, you may find that your golden years don’t shine nearly as brightly as they could.
Some hobbies or endeavors cost more by their very nature. However, investing in keeping yourself busy will likely come with financial costs and it’s important to plan for these costs ahead of time. For example, if gardening is your hobby, you will need to purchase plants, fertilizer, tools, pots, gloves and soil. If you’re a traveler, the cost of plane tickets, lodging, gas, rental cars and dining will constitute your expenses.
Although you can control your finances, like by setting a budget, you must also consider your quality of life in retirement. A large nest egg can provide greater fulfillment in your newly found free time.
Covering The Unexpected
If you’re looking to understand why planning early for retirement is important, it’s helpful to look at the trend of unretiring. Unretiring refers to when retired people go back to work, and while there are many reasons for doing so, more than half are returning because they need the money.
Expenses can be planned for, but even careful planners may find that unexpected and even elevated expenses can come about when retiring. Therefore, if you’re planning for a specific budget, you may not have enough funds should something unexpected arise.
Among unexpected events that could derail a budget are medical issues, helping a family member and disasters such as a house fire. But if you have the right nest egg, you’ll be in a better position to absorb the blow and move forward with maintaining your quality of life.
Saving Early For Retirement Provides Peace And Security
Ultimately, the benefits of planning for retirement early aren’t necessarily groundbreaking, as it is a matter of dollars and cents. However, it is important not to lose sight of what more money means for the years after you stop working. Often, people who delay funding their retirement nest egg may not consider everything they are giving up in the future.
By getting an early start on planning for retirement, you’ll receive more financial security, peace of mind and enough funding to cover your expenses and dreams. Get started today if you haven’t already, and plan for your retirement early to enjoy a higher quality of life in your golden years.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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