Why financial planning for retirement is essential

Despite the desire to one day stop working, many Americans don’t begin financial planning for retirement until they’ve been working for several years. With the high cost of living, it is important for people to start saving money as soon as possible for their lives after they finish working. A recent study shows that roughly four out of five full-time employees have access to a company-sponsored 401k or similar investment strategy. On the other hand, more than four in ten Americans have no pension or long-term savings. No matter what your method of saving is, there are plenty of reasons why you should start today.

you will live longer

In 1950, when much of the baby boomer generation was born, the average life expectancy for an American was just over 68 years. As of 2010, that number has increased to 78.7 years. So what does life expectancy have to do with financial planning for retirement? The longer you live, the more money you will need to survive. In 1950, if you retired at age 50, on average you needed enough savings to live another 20 years. Today you need enough savings for about three more decades.

Social security is not enough

The average American receiving Social Security receives about $16,000 per year or about $1,250 per month. For the vast majority of Americans, this is not enough money to live comfortably. Also, you cannot start receiving social security benefits until you are at least 62 years old. That means if you retire early, you’ll have to rely entirely on your own personal savings, 401k, or pension.

Retirees face higher health care costs

Along with regular expenses like mortgage payment, groceries, insurance, and entertainment, retirees also face the ever-increasing cost of health care. In addition to health insurance premiums, an American couple of retirement age, say age 65, can expect to pay almost $600 per month on average for routine medical procedures, checkups, and medications. At age 75, that cost will be more than $700 per month.

Retiring must be nice

So far we’ve discussed all of the negatives associated with not having proper financial planning for retirement. Now let’s see what you can do with a secure plan. As mentioned above, people are living longer lives than ever before. This, coupled with a lack of work, means huge amounts of time for leisure activities. If you’re financially secure, this may mean visiting relatives out of town regularly, taking vacations across the country and the world, and even regularly enjoying high-end restaurants.

In short, financial planning for retirement is a must for a healthy, stress-free and timely retirement. The earlier and more you save, the less you have to worry about in your later years.