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No one ever really knows what will happen in the future, but they do know that eventually, they will hope to retire from their jobs and settle down. It can be scary to think about the future, especially when thinking about the financial status that you will have when the future arrives. It is important, especially for your financial health, to begin planning for the future as soon as possible, no matter how old or young you are. You can read about five reasons to start planning as soon as today in the information that can be found below.
1. Social Security Changes
No one ever really knows how much longer social security funds will be available for senior citizens and retirees, and the amount that some individuals are given is slowly on the decline as well. The average amount that each individual receives currently, for instance, is around $1,400, which is not enough for one individual to live comfortably on their own. Government officials and citizens of the country alike worry on a normal basis that within a couple of decades, the money supply could be completely depleted. That means that the payments are almost sure to get at least lower for the retirees and senior citizens in the next decade or two.
2. Tax Benefits
If you begin making contributions to the money that you hope to have available in the future, you may be eligible for benefits on your tax return. If you contribute to your IRA, for instance, you do not have to pay taxes. The taxes are paid on this retirement fund only if you withdraw the money from your account to use for emergency purposes or something else. This may even reduce the amount of taxes that you have to pay back to the IRS when you file your return.
3. Added Interest
If you add any money to your future funding sources now, you may gain money on that amount through compound interest on it. This means that by the time you are ready to use that money, you will actually have more in your account than what you put in. Even if you invest in the stock market for this, whether you use an index fund vs mutual fund, you will earn this compound interest over time. Be wary though, as the stock market especially is something that changes all of the time so you never know.
4. Catch-Up Contributions
You do not have to worry though if you have not been making these regular payments and are close to the age of retirement. You can make what is known as a catch-up contribution in which you earn this amount of compound interest. It may not still be quite as much as others receive who have been making regular payments for years, but you can still earn a good amount of extra interest. If you are not close to the age of retirement, start making payments to your IRA even today so that you can earn this money.
5. Affordability
The final and most common sense benefit of beginning to plan for your future now is that you will feel more ready for retirement. If you do not take these steps to plan today, you likely will be unable to afford to live a comfortable life off of just social security. You may even have to find a part-time or full-time job to supplement your normal government checks. If you start now, you will be much more comfortable in the future for when you are ready to settle down or if something were to happen.
If you are not ready for your future, then you need to take the steps necessary to start preparing. It is important to be able to have financial freedom no matter what your future holds or no matter the retirement you are planning for. Consider the benefits above so that you can live a comfortable life no matter what the future may hold in the financial industry. It can be difficult to rely on the government alone or on another source at any time, so consider opening a retirement fund or an investment opportunity today.