We all know that we should be saving for our retirement, but sometimes it’s hard to get started. It seems like there are so many other things to worry about right now such as bills, mortgages, and kids’ tuition. The list goes on and on. The truth is, the earlier you start saving for your retirement, the easier it will be. The following are the benefits of securing your financial journey now.
You Can Take Advantage of Dollar-Cost Averaging
Dollar-cost averaging is an investment technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. This means investing a fixed sum of money into security or securities at fixed intervals. Once you know how to calculate stock dividends from your investments, you are good to go.
By buying these securities gradually, you reduce the effects that sporadic changes unrelated to the underlying security might have on their price.
Dollar-cost averaging helps reduce the riskiness of your portfolio by buying more shares when prices are low and fewer shares when prices are high. So by investing a fixed sum of money into different securities over time, you reduce your risk and ensure that you’re buying at a good price.
The beauty of dollar-cost averaging is that it takes the guesswork out of investing. You’re not trying to time the market or figure out when the best time to buy is. You’re automatically buying low and averaging your purchase price over time.
More Time to Save
The earlier you start saving for retirement or other financial goals, the more money you will have in the long run. By starting early, you give yourself plenty of time to save and let compounding do its thing.
For instance, over 30 years, $100 saved per month will grow to more than $200,000 if it earns an annual return of eight percent.
You need to know that your money will grow faster over time due to compounding interest rates when you start early versus waiting until later in life when they compound less often. This means that even if it takes longer for an investment account balance to double or triple in size due to these factors, there’s still an advantage over starting later on.
It’s easier for younger people to save because they have more energy and motivation than older ones who might be tired from work or taking care of kids.
More Time to Recover From a Financial Setback
You’ll have more time to make up for any shortfalls down the road. For example, if you don’t save as much as you should or something unexpected comes up that eats away at your savings, having more years ahead of you will give you a better chance of making up for lost ground.
If something unexpected happens and you can’t work anymore, then you’ll have a cushion to fall back on because you’ve been saving for so many years leading up to that point.
Moreover, if something goes wrong with your investments or there’s an unexpected expense, don’t panic because you still have time to make up for it.
When you’re young, it’s easy to make financial mistakes because so many things can go wrong. Unexpected expenses come up all the time, like car repairs or medical bills. But if you start saving now, these missteps won’t derail your future plans.
Diversified Portfolio Investments
If you start saving now, it will give you more time to experiment with different types of investment vehicles and strategies so that by the time you retire, you’ll have a plan that best suits your needs. For example, if you wait until later in life to save, you might not be able to invest in certain types of accounts or funds geared towards retirees.
More Freedom in Your Retirement Years
When you are young, it may be hard to imagine what life will look like 20 or 30 years from now. But if you start saving now, then by the time you retire, there’s a good chance that your financial worries will be behind you and all of your needs can be taken care of.
Peace of Mind
Securing your financial journey early gives you the peace of mind that comes with knowing you’re on track for a comfortable retirement. When you know you have a solid financial foundation, it’s easier to relax and enjoy life without worrying about money all the time.
There are many good reasons to start saving for retirement early, and the benefits go well beyond just having more money down the road. So if you’re not already doing so, make it a priority to start saving today. You’ll be glad you did.