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Why It’s So Important To Save Through Investment For Retiring

Posted on 17, Mar, 2014

If you ask people in their 20s about their financial plans for retirement you'll generally see them roll their eyes in the head and talk about "living in the now". The other side of this chronological coin is asking somebody in their 40s what their retirement plans are, and instead you'll probably see a look which lies somewhere between confusion and terror.

The simple fact is that most people create a mountain of excuses for not saving for their retirement, and every single one of these sounds entirely plausible at the time. Regardless of what excuses you might be able to come up with the fact remains that you need to plan carefully for your retirement, or face the prospect of living out the golden years of your life in something approaching abject poverty.

So here are the reasons why you absolutely need to start saving for your retirement right now:

Avoid Welfare

Even though the social welfare system is there to support people who haven't adequately planned for their retirement you really don't want to be relying on it as your sole source of income. If nothing else you need to factor in that the welfare system might be abolished, or run out of funds, leaving you in a very awkward financial position. In a properly prepared retirement plan the social welfare system would only ever be used to supplement your existing financial resources.

Offset Your Income Taxes

IRAs and 401ks, as retirement vehicles, are an ideal way to offset some of the taxes on your current income. Basically you get to save money in many of these retirement vehicles tax-free, or at least you do unless you decide to cash them in early, where specific penalties can apply. Plus there's also the advantage that by making tax-free contributions to these plans you're also reducing the amount of personal income you have left at the end of each year, reducing your tax bill at the same time.

Maintain Your Lifestyle

Far too many elderly North Americans are forced to live with their children during their retirement years, simply because they can't afford to live on their own. In the vast majority of cases this is because of inadequate retirement planning, and over-reliance on the social welfare system. While spending tons of time with your kids might seem like a great idea now, you'll obviously still want to have your own independence in the latter years of your life.

Investment Security

IRAs and 401ks aren't the sexiest forms of investment known to humankind but they are proven, they are safe and they are reliable. There will come a time in your life where taking financial gambles will lose its appeal, and the promise of having several hundred thousand dollars stashed in your retirement fund being far more appealing. If you want to diversify your investments then that's entirely your own choice, but just make sure that at least some % of your investment funds are placed in reliable retirement vehicles like an IRA or 401k – speak to your broker or accountant about that.

To make sure that you're making the best possible choices for your future financial security it's always a wise move to get the guidance of your accountant or broker when planning your retirement - they'll be able to explain what you need to do in plain English, without any of the jargon.

 

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