The answer is simple, NO. It is never too early and you are not too young to start saving for retirement. This is because the sooner you start saving, the more time your money has to grow. Starting while young can make a big difference by generating gains over the years through a powerful wealth phenomenon known as compound interest which is simply the addition of interest to the principle sum of a deposit. Who does not want to enjoy life after retirement? This article will give a simplified guide to saving for retirement.
When should I start saving for retirement?
Starting to save for retirement as early as possible can set you up for success in the long term. It is more reasonable and ideal to start saving for retirement the moment you earn your first income, usually in your 20s. Having millions in your account often seems worthy but unattainable but getting a million might not be difficult if you know the secret: time. If you start saving at a young age, you give your money enough time to grow. You will only need relatively small investments of money, made consistently, to wind up with a big balance.
How much money will I need in retirement?
There is no set amount of money required to retire although it advisable to start by having retirement goals. Figure out how much you need to save in order to comfortably afford your retirement. It is important to plan and budget your income by putting aside a certain percentage as retirement savings. A good way to estimate your retirement cost is to take a close look at your current expenses in various categories and estimate how they will change. For instance, your health care costs are likely to rise. Then again, your mortgage may be paid off by then. It is also very important to approach an insurance company and seek guidance from professionals on how much you would need to save to reach your retirement goals.
Where should I save my retirement money?
There are primarily two types of retirement arrangements where you can save your retirement money namely;
– Individual Retirement Arrangement – This retirement plan entails Individuals approaching an insurance company and set up a retirement benefits savings plan. This plan makes it able for individuals both in the formal and informal sector to put aside savings for retirement within their own individual capacity.
– Group/Business Retirement Arrangement – This plan is mainly instituted by organizations whereby employers put aside a pension plan to cater for the welfare of employees.
A good example of a retirement savings plan is the CIC Jipange Plus Pension Plan. It is a savings plan that offers benefits which include;
- – Tax exemption.
- – Gain access to professional management of your savings.
- – Minimum return of 5%.
Why should I save for retirement?
It is important to think about where your income will come from after you retire therefore, saving for retirement is vital. Some of the important reasons you should start saving for retirement include;
- The value of compound interest
The reason it is important to start saving as early as possible is that having a longer horizon gives compound interest more time to earn. Compounding enhances the value of your savings. A young saver can greatly benefit from the compounding effects of investing in retirement plans.
- For a more relaxed transition into retirement
An individual with a retirement saving plan worries less about transitioning into retirement compared to an individual without a retirement savings plan. This is because, having a retirement plan helps to have a smooth transition into retirement as you are not able to actively own an income.
- Granted guarantees on the returns on your savings
Most retirement plans give guarantees on minimum rates of return. Therefore, the total earnings you get on retirement will never be less than your total contributions.
- Solid financial habits
Putting some money aside for retirement also helps young people develop good financial habits. As you see the money for retirement start to grow, it can encourage you to keep saving. One is able to see the benefit of saving and helps you build other funds, such as an emergency savings fund.
It is therefore vital to start saving for retirement as soon as you can because it gives your money time to grow as well as giving you the freedom to retire as early as you wish once you achieve your retirement savings goals.
For more information on saving for retirement, follow this link https://cic.co.ke/wp-content/uploads/2020/08/CIC-Jipange-Pension-Member-HandBook-.pdf which gives a comprehensive breakdown of how the CIC Jipange Plus Pension Plan works or feel free to call us on +254 703 099 120 or visit https://cic.co.ke/.