A good question is when “should” you start saving for retirement? The truth is, this is one financial task you must start working on immediately.
When you retire from work, the regular income that supported your lifestyle will cease. How will you finance your basic needs? How will you pay for your food, shelter, clothing, and the various medications that seniors usually require?
This the main reason why you need to save for retirement. Unless you want to keep on working until you drop, this is something you need to work on as soon as possible.
Why you need to save for retirement as early as possible
According to an article published in the South China Morning Post, many locals said they feared they would not have sufficient funds to live on after retirement.
This is surprising because the article also revealed that Hongkongers saved the biggest share of their salary for retirement, compared to others in 15 countries.
Apparently, the average worker in Hong Kong saves 31% of their salary for their twilight years. Despite this, many still think it will not be enough.
Let’s assume you are healthy and will live a long life, say, around 20 years after you retire.
If you decide to retire when you are 60, that means you need to save enough now to keep you financially comfortable until you are 80 years old.
Tips to help you plan for retirement effectively
Here are a couple of tips that will help you meet your retirement savings goals.
• Know how much you will need to retire on. Think about the type of lifestyle you want to have. Be realistic and practical. Do not aim too high when it comes to your retirement target.
You do not want to pressure yourself at present just because you have high hopes for your future. Knowing how much you need to retire on will give you the target amount you need to save up for.
• Treat it like a bill. When you receive a bill, you have no choice but to pay it off – in full. When it comes to your retirement savings, the same should apply.
If you commit to saving RM2,500 a month, stick to it. Only a life or death situation should make you do otherwise.
• Save any windfall money. If you get a commission, a bonus or an unexpected financial gift, use a portion of it and save the rest.
Do not splurge on things that aren’t important. While you can reward yourself, do not forget that your future self also deserves to be rewarded through your retirement savings.
• Constantly check your retirement savings. Do not be complacent even if you have never missed a contribution. Always check your investment so you are sure that your savings are right on track.
To save for retirement at an early age is the best gift that you can give your future self.
This article first appeared in thenewsavvy.com
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