While we are facing the worst global financial crisis in our generation, this is enough a reason to think 20 or 30 years down the road, when you’ll call it quits and hopefully start you’re retirement life. When you ask many people the kind of life they want after retirement, it’s a life where you have to make large contributions to your pension fund to live that kind of lifestyle. The opposite is true when you come to contributions, when a lot of people are making just the minimum payments. Mikael Rieck gives three reasons in the following article on why saving for retirement is important.
This might shock you as much as it did me, but statistics show that the average American is saving up a “staggering” $392 per year! Three hundred and ninety-two dollars per year, or only about one dollar per day! You don’t have to be a math genius to see that only saving $392 on average will definitely bring some financial difficulties further down the road, when people are getting closer to their retirement age. I can only imagine how desperate you must feel, when you realize that you have absolutely no money to show after working an entire life, and that the rest of your life where you’ll have all the time in the world to enjoy your hobbies and passions, will instead be used on turning every cent because there are literally no savings.
Reason number 1:
The average American household makes about $50,000 per year, and even though that is a decent amount, you will still have to put a fair chunk of it aside if you want to be absolutely certain that you will have enough money to not only just get by, but also be able to enjoy your life when retired. Most people will retire somewhere around the age of 60-65 and as humans are getting older and older, you can look forward to living 15-25 years retired from your job. Take your current monthly expenditure, and multiply it to see how much you would need in savings to just keep your standard of living as it is. If you don’t start saving and/or investing today, then you’ll only make it harder on yourself by every day that passes by.
Reason number 2:
If you have ever heard of the term compounding interests then you’ll probably know that it can be a good thing if we’re talking about your savings, and a bad thing if you have debt. Compounding interests are a mechanism that will increase the speed in which your money becomes more money. You’re letting your money work for you instead of you working for money. However, you will also find that even though compounding interests can have a dramatic effect on how much your money increases in value, then the fuel that makes it grow is time (and interest rates of cause). With very little time for money to do their job, you will not get very much from it. Instead, if you are able to let your money work for 30-50 years, then you will see tremendous results. So again the conclusion is to start saving up today!
Reason number 3:
Unless you have been living under a rock for the last 3 years, you have probably seen that the world is in a financial crises where everything has dropped significantly. Share prices have plummeted, and so has the value of most pension fund’s investments. So if you have been saving the bare minimum in order to just get by when you are retiring, and the value of your portfolio has lost 50% or more, then you’ll now have to live the rest of your life on half of what you had hoped for. Doesn’t sound that compelling does it? So no matter how much time you have left before retiring, you should start increasing your savings and investment strategy today, because you can never know what will happen and planning on “luck” to come to the rescue is not something you should hope for.