Most financial institutions recommend that you start planning for your retirement as soon as you enter the workforce, ideally in your twenties. There are a variety of ways to invest money to prepare for retirement. The earlier you start, the more money you will have available when you retire.
How It Works
When you retire, Social Security benefits are guaranteed to be paid to you on a monthly basis for the rest of your life. For most people, the small amount they will receive each month from Social Security is hardly enough to meet the innumerable, yet essential monthly expenses. It may only be a mere fraction of the amount of money you made while working, depending on the amount paid into the system and the length of time Social Security tax was paid.
People who retire have to drastically alter their lifestyles in order to make ends meet, or they may even have to continue working in some capacity to be able to pay their bills. Retirement planning involves making investments earlier in your life to save money to help fund your retirement and prevent you from having to rely on your regular savings and Social Security benefits alone. It can involve annuities, IRAs, a 401k and other methods of investment for retirement.
You will have complete peace of mind in knowing that you will not have to struggle to survive once you retire. If you start when you are young, say in your twenties, and make wise investments, you could retire quite wealthy and need not worry about how to stretch your Social Security benefits.
Careful retirement planning also offers income tax benefits. The money you defer into certain accounts, like a Roth IRA or Roth 401k, goes directly into the account without being taxed. If you withdraw the money properly, you can avoid taxes at that time too.
If you want help with retirement planning, then factor in the cost of a financial planner or lawyer to help you strategically invest your money. You may even want to hire a broker in some cases. If you plan on contributing to the standard Roth IRA and 401k, the cost is only the amount that you invest in these plans.
It's never too early to start retirement planning-the earlier, the better. Even if you are well past your twenties and thirties, retirement planning even at this point can help make your retirement years easier.
There are a lot of ways in which you can plan and save for your life after retirement. Your employer will offer a 401k, but brokerages, insurance companies and financial institutions offer other plans like annuities and IRAs.