It’s quite understandable why retirement isn’t a priority for most 20-something year olds. The main concern, at this age, is kick-starting a career rather than thinking about how things will be like in the distance future, if anything is to go by, you will have your NSSF money by the time you retire. Though think about it, will your NSSF funds be enough; are there advantages of saving for retirement early, what are the risks of saving for retirement later in life?
Being in your twenties has a couple of financial advantages as compared to the other age groups. For starters, time is on your side plus you have less financial responsibilities as compared to when you will on the other age groups, reasons why you should begin making your retirement plans.
Below are several benefits, from fatwallet.com, associated with saving early for retirement.
The main benefit of saving early for retirement is you will have the option of retiring sooner. Picture this, if start saving KES 3500 every month from when you turned 25 will have saved KES 1,050,000 by the time you turn 50. This gives you the option of taking an early retirement a decade earlier as opposed to working till you are 60. The older you are, the lower your ability to work meaning in the even you are unable to work, your mature retirement fund, NHIF money and other retirement benefit funds will come in handy, allowing you to take care of yourself as opposed to depending on your children or grandchildren.
As opposed to saving, you could opt to invest your monthly retirement savings in a mutual fund or fixed deposit account. What this means investing KES 3,500 every month, from the time you are 25, on a secure mutual fund or fixed deposit account over a duration of 25 years will translate in you having more than KES 1,050,000 as retirement money. As fatwallet.com puts it, making more after you’ve retired means saving early.
Financial smart 20 year olds have long term goals; this could perhaps entail having some long term investment goals such as investing on stocks. If you plan to rely on your long term investments and perhaps something goes wrong, such as a decline in the stock market, your entire retirement investment money would have gone into waste.
The 60 percent budgeting plan allows you to save at least 30 percent of your net income. This is divided into 3 parts: 10% of this goes to retirement, 10% goes to short term savings and another 10% goes to long term savings. If your long term savings backfire, your retirement savings will still be there as your backup plan, still securing your golden years.
In as much as thinking about retirement might seem a little bit farfetched plus you might be coping with dare minimum payment, you still have the option of cutting costs where you can so that you can save something small every month channeled towards retirement. It might not seem much now but with the advantage you have over age; you will definitely have a lot more in the future.
Remember, saving early makes retirement so much easier. No one else stands to benefit from it but you or your next of kin.