Are you a millennial who hasn’t started saving for retirement yet? You have company. According to a new report from the National Institute on Retirement Security, two-thirds of people between the ages of 21 and 32 have nothing saved for retirement.1
Of course, you may not feel like retirement is an urgent priority. After all, you have decades left until retirement. You also may have more pressing financial issues, such as student loans, credit card debt or child care expenses.
While retirement may seem like an issue for the future, it’s wise to start saving today. Below are three reasons why it pays to start your savings plan in your 20s. A financial professional can help you develop and implement a savings plan.
You may not get the benefit of a pension or Social Security.
There was a time when retirees could count on pensions and Social Security to fund their retirement. Those days are long gone. Today’s retirees and future generations will likely have to fund much of their retirement with their own personal savings.
For years, employers have been shifting away from pensions and into 401(k) plans. In 1998, 59 percent of Fortune 500 companies offered a pension to employees. As of 2017 only 16 percent of those companies offered a pension to new hires.2
Social Security benefits are also in jeopardy for future retirees. The Social Security trust fund is projected to run out by 2034. At that time, benefits could be reduced 21 percent. It’s possible that benefits could be reduced even more in the years beyond.3
If you’re in your 20s, it’s important to recognize that your financial stability in retirement will depend largely on your ability to save. The earlier you start, the better off you will be.
You can save on taxes by saving for retirement.
Your retirement savings are largely for the future, but they can also offer benefits today. Some retirement accounts offer current tax benefits for your contributions. For example, assuming you meet income guidelines, you can contribute as much as $5,500 to a traditional IRA and then deduct the contribution from your taxes.
Also, contributions to a 401(k) are usually deducted pretax from your paycheck. The deduction reduces your taxable income, which then reduces the amount of taxes withheld from your pay.4
Time is your most powerful tool.
The most important reason to start saving early is so you can take advantage of your most powerful financial tool—time. The earlier you start, the more years you’ll have to put money away. That means you may be able to put away less each year to reach your goal. You also get additional years to let your assets grow and compound, which could help you accumulate more assets.
If you wait until your 40s or 50s to start saving, you may find that you have to put away a significant amount of money to reach your goal. In fact, if you start late, it may not be feasible to reach your goal, and you may have to compromise by delaying your retirement.
Ready to start saving for your retirement? Let’s talk about it. Contact us today at Stoll and Basler Financial Services. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
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