We all have heard that we should start saving at some point. But, why? Here is a quick retirement savings benefit guide to get you started on those savings now!
The sooner you start, the bigger your savings and interest will compound
- If you don’t know what compound interest is, check out my post!
- Because your retirement savings are intended to be withdrawn after 65 years of age, if you deposit $1000 when you are 25 years old, that amount will have 40 years to grow. Compared to starting at 40, 45 or 50 years old.
Another retirement savings benefit: Pay less Tax
- Every deposit, up to your allowed limit, will be deducted from your total taxed income, penalty-free. This means that if you paid taxes for a $50,000 salary in 2020 and you contributed $5,000 to your retirement savings in the same year, then on your annual income return, the tax for your salary will be re-calculated to $45,000 and some of that paid tax will be deposited back to you.
You will have a very decent retired life
- What do you want to do when you retire? Are you planning to travel? Possibly help your family? What if you need to pay for a retirement home or a caregiver for yourself? Can you afford that with the monthly pension plan by the government? I don’t think so.
- Prepare yourself and save now to have the quality of life you deserve in your golden years, otherwise you may end up working in your 70’s or 80’s.
Maybe you can retire earlier
- If you are very disciplined with your savings plan and are able to save 50% or 70% of your income, maybe you can achieve FIRE. Check out my Financial Independence, Retire Early post!
- Do you need an example? Check Our Rich Journey, an American couple that retired before age 40.
- It is possible and achievable. If you are able to retire at 45 and pocket 20 extra years of retirement to your life, that is like an extra quarter of your life spent without working! Imagine all the things you could do? Travel, hobbies, reading, relaxing, all those things that you never had time to do. What about the opposite and stop doing all those things that you currently don’t like? Maybe it is your job, waking up early, feeling drained or unhappy every day.
