A common misconception about saving for retirement is that it can wait, but this way of thinking is doing more harm than good. A TD Ameritrade survey found that 66% of millennials say they need to catch up on their retirement goals.
The longer you take to start saving for retirement, the less you’ll have to rely on once it comes time to retire, which is why it’s crucial that you start saving for retirement as early as possible. Here are four reasons why you’ll want to sign up for your company’s retirement plan ASAP.
The earlier you start saving, the more money you will have to sustain yourself in retirement, and the more financial freedom you will have. Delaying your retirement savings could make it so you end up being financially dependent on others, which is not only unstable but will limit your ability to go out and enjoy the benefits of retirement that you looked forward to during your working years.
Reduced Income Taxes
In a traditional 401(k) account, deposits are made with pre-tax dollars, lowering your taxable income and therefore the amount of taxes you will pay for the tax year. You will have to pay taxes on your withdrawals in retirement, but if you’re in a lower tax bracket in retirement (which most people are), then you most likely won’t have to pay much in taxes on your withdrawals.*
*We highly recommend that you speak to a certified tax consultant when making these decisions.
This should go without saying, but the earlier you save, the more time your investments have to grow. Thanks to compound interest, your investments will continue making money without you having to lift a finger. Do keep in mind that how much you make in compounded interest is dependent on many factors, such as rate of return, how much is invested, just to name a couple.
Social Security Isn’t Secure
Many people believe that social security will be a reliable source of income in retirement, yet in reality, the amount retirees receive is negligible. As a result, retirees often have to find other sources of income (or even going back to work) to help pay for basic living expenses. On top of that, Social Security benefits are projected to be exhausted by 2037, making it even less reliable as a source of income.
Saving for retirement early is easy with SaveDay. Our robo-advisor platform and affordable costs make for a quick and effortless way to save for retirement. All you have to do is pick a portfolio based on your risk tolerance, and then we do the rest! If your employer doesn’t have a 401(k), have them reach out to us today.
Photo by Vinicius Wiesehofer from Pexels.
*SaveDay does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. SaveDay makes no warranties with regard to such information or results obtained by its use and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation and before engaging in any transactions. Investing involves risk, including the risk of losing principal.