Planning for your retirement might not be the most thrilling task, especially when you have to deal with the demands of daily life, and you’re striving to achieve other financial or career goals. However, in the long run, it’s a wise decision, one that can provide you with financial security when you retire.
What other reasons are there for you to save for retirement, though, and how can you save for retirement? There are a few retirement saving plans around the world; one of the most prominent in Australia is the superannuation fund.
To give you a better idea of why it’s so important to save for your retirement, we put together a few motivating reasons why you should save for retirement.
1. There’s a tax benefit
We’re not sure about you, but we’d want to do everything we can to ensure our earnings are going towards our own benefits. We work hard for our salaries and it can be really demotivating when tax takes a large chunk of it. But that’s how the world works right? Wrong! The Australian government has given you some effective ways of reducing your tax, one of which is investing on you retirement.
Literally, if you’re investing in superannuation, you can save up to 15% on your tax. That means that’s 15% of your tax that still goes towards your future.
2. Life expectancy has increased
Due to the standard of life in Australia, the average person’s life expectancy is rising, meaning that their time in retirement will potentially be longer, requiring them to have more in savings to support themselves.
Now, we don’t want to sound like we’re being negative about the idea of living longer, because that is pretty amazing. But we do need to be realistic. Living longer requires a retirement fund that can last longer. Investing in a retirement fund early can significantly improve the amount you end up with when you retire.
3. The increase in medical costs
Getting old isn’t fun. It’s going to be tough, especially in regard to health. As we get older, we become more prone to health issues and injury, which means our medical bills are likely to go up as well. Planning effectively for your retirement can help you factor in the potential increase in medical costs so that you’re ready and able to afford the care you need in your old age.
4. Financial Security in Retirement
You might have seen the difficulty some people go through because they have no funds when they retire. They have to sell houses, move in with children, or significantly reduce their standard of living. Now, there’s nothing wrong with your children helping you financially when you’re retired, considering you raised them, but this can all be avoided if you plan for your retirement accordingly. Having decent retirement savings offers you financial security when you retire.
5. It’ll prepare you for inflation
Inflation is a silent killer when it comes to savings. You could spend your entire life saving your money in a basic savings account, and by the time you are ready to retire, it might be worth less than you initially thought. This is because it wasn’t inflation-proof. Using a retirement plan that has the potential to outpace inflation will benefit you during retirement because it’ll match the amount you need to survive. Plans that invest in things like stocks and real estate are a good example.
6. Safeguards your lifestyle during retirement
Consider the lifestyle you want to lead during retirement. Would you like to go out to restaurants, have weekends away with the family and spoil your grandkids – or would you rather be locked up at home worried about finances? Planning for the lifestyle you’d like to have in your retirement starts now. The sooner you consider your goals, the earlier you’ll be able to get started on your retirement planning to meet them.
7. Estate Planning
Estate planning and considering your legacy are essential factors in your retirement planning. Consider what legacy you want to leave for your family, and if you have kids and grandkids, who’s going to get what?
Usually, estate planning involves creating a will, setting up trusts, choosing beneficiaries for retirement accounts and insurance policies, and considering the tax implications of transferring your wealth. Remember, if the state doesn’t know who to give your belongings to they might just claim them.
8. Prepares you mentally and emotionally for retirement
The transition into retirement is not only a financial shift but also a significant psychological and emotional journey. Think about it: you’ve worked your entire life, striving towards a goal and building something. When you retire, that’s all gone, and you’re left with the results of your labour. Saving for retirement can be an effective way of preparing psychologically for this. Retirement can often feel boring or lonely for some. Planning around this can make your retirement a pleasure.
Final Thoughts
So, why should you save for retirement? Well, the simple answer is so that you can actually retire. Without savings, you’ll most likely have to continue working to provide for yourself which isn’t ideal. Saving for retirement with provide you with financial security as well as allow you to enjoy your retirement well!
