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<br>The word retirement conjures up several images: leisure travelling, spending time with grandkids, indulging in new hobbies, and just general recreation. Having worked hard for the majority of our adult lives, we look towards retirement as a period of well-deserved rest and personal fulfilment. To ensure that you have just the right amount of finance for such a lifestyle, it is important to begin your retirement planning early. Even though retirement might be the last thing you think of as you begin your career and start living independently, taking small steps in the present can help you in major ways in the future.<br>
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5 Reasons Why You Should Begin Your Retirement Planning Early
The word retirement conjures up several images: leisure travelling, spending time with grandkids, indulging in new hobbies, and just general recreation. Having worked hard for the majority of our adult lives, we look towards retirement as a period of well-deserved rest and personal fulfilment. To ensure that you have just the right amount of finance for such a lifestyle, it is important to begin your retirement planning early. Even though retirement might be the last thing you think of as you begin your career and start living independently, taking small steps in the present can help you in major ways in the future. In this article, we look at 5 reasons why you should start planning your retirement as early as you can.
1.The advantage of compounding interest An early planner can enjoy the benefits of compound interest. When an amount benefits from compound interest, it gains interest not only on the principal amount but also the previously accumulated interest. So, let’s say you invest S$ 500 on a monthly basis with 5% annual compound interest rate. Now, the returns you will receive in the first year would be S$ 300. The next year, the interest would be levied on the yearly S$ 6000 as well as the S$ 300. In this manner, the amount you invest would earn returns on its own interest. Thus, with the compound interest component, the sooner you begin your retirement planning, the better returns you will get.
2.Takes care of inflation early on Any plans that you may have for your retirement should be structured keeping in mind the rates of inflation. As the prices of goods and services undergo gradual increase, it is necessary to have a regular source of income that acknowledges these changes and takes inflation into consideration. . Even though your CPF is adjusted to inflation, the limited pay-out may not fit into your vision of a good life of retirement.
This is where a good retirement savings plan can step in to help you. Leading insurers offer plans which safeguard your retirement payouts against market volatility. Your payouts may also potentially increase as each year passes. This will help lend stability to your future finances and thereby ensure that the rise in prices is dealt with by your astute retirement planning. So, if you are worried that the rising costs will bite into that Europe trip you have planned to take once you retire, you can rest easy as your retirement plan is there to back you up.
3. Empowers you for a quicker retirement Presently, the official retirement age in Singapore is 62 years. Now, you may or may not want to work till you reach that age. If you are keen on an early retirement, then you need to have a proper retirement savings plan in place. There are retirement savings plans out there that offer pay-outs beginning from as early as 50 years of age. If you begin saving in your 20s or early 30s, with enough planning and self-discipline, you will be able to retire sooner than your peers. Proper retirement planning ensures that you not only get to retire early but do so with strong financial backup.
4. Saving when younger is usually simpler As you grow older, you will acquire more responsibilities. The steps up the ladder of life are going to be fraught with expenses related to increasing insurance premiums, a higher standard of living, beginning and sustaining a family, medical costs, and so on. Now, while you are still young and are not shouldering these several responsibilities, you will have more disposable income in your hands. You may also have the time required to adequately research and enquire about the ways in which you can begin planning for your retirement. This makes your 20s and early 30s an ideal time to begin retirement planning.
5. Helps avoid last minute panic Doing your retirement planning early allows you the peace of mind to do it in a systematic and efficient manner. You can begin small and increase your amounts as you start earning more. You can even be a bit flexible in your investments during later periods as you will have the assurance of a strong accumulated corpus. If you begin late, apart from the large amounts you will have to invest, the hassle of last-minute planning can lead to a disturbed mind and stop you from thoroughly enjoying your later years. We hope this article has been informative and helpful. Do speak to a financial consultant for help in selecting the right retirement savings plan for your needs.
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