Not many of us think about retirement. The reason is obvious; when we can spend money now, why save for the future? We can use the money we earn to watch our favorite movies, go on those dream vacations, or even buy a house! The opportunity and desire to spend are immense in this materialistic world. Be it for comforts or prestige, each one of us earns money to have a better life. However, what we are often forgetting is our ability to work will someday expire with our age. When we are no longer young and bold, we will have reached the age of retirement. And if you think saving is tough now, imagine how you will do it at the age of 60! Now is the time to think about retirement savings.
“Whether you are just entering the workforce or nearing retirement age, planning for the future is critical” – Ron Lewis (retired American Politician)
Here are three reasons why you should save for retirement:
You Can’t Rely on the Welfare System
While financial assistance from the Welfare System is a good support, it should not be your only choice to support your retirement years. With the limited income that the social security income provides, you run the risk of barely supporting your daily necessities.
Quick Statistic: On average, Social Security payments make up only about 38% of Americans retirement income.
Independence and Self-Sufficient Living
If you have children, a retirement option can be to live with your children. However, being financially dependent not only means depending on someone else for a living but also giving away your independent decisions and freedom. You definitely wouldn’t want to work hard all your life for a good living and end up being a financial burden in your retirement years!
Retirement Savings Saves on Income taxes
Most retirement accounts offer tax benefits. Some benefits are realized immediately while some are realized in the future. IRA, 401k, and other types of retirement plans are a future source of income, and contributing to retirement plans can often give you tax benefits today. When you contribute to the 401(k) plan on a pre-tax basis, it reduces your take-home salary and hence you pay a lesser income tax. In other words, you have a lesser tax liability. When you withdraw this amount in the future you are liable to pay a tax on the amount you withdraw. However, this withdrawal tax will be lower than the amount that you have saved on income taxes in the present through retirement savings. This is because you will likely have a lower income in retirement, which may place you in a lower tax bracket.
Hence, retirement savings and planning is important. It is the determining factor of your satisfaction with your retirement lifestyle. Savings for me are deferred gratification which makes me put off the purchases now but later gratify me with independence and security. Start your retirement savings today and be carefree about your future!