Planning For Early Retirement

Why Should You Plan Early For Retirement

When it comes to retirement planning, the most often repeated advice you hear is to start planning as early as possible. If you want to have a financially secure retired life then this advice is one you should definitely follow. Planning early in life for your retirement lets you take advantage of the best investment options that there are in the market.

Early Start for High Risk Tolerance

The recession left many near retirees in a state of ruin financially because they were too near retirement to make up for any losses. Their earning period was very limited so there was no way to replenish their nest egg. When you start early, you have a number of years in which you can make up for any losses you sustain. As you have a good many earning years ahead of you, you can afford to even invest in higher risk avenues such as equity which typically also offer higher returns.

Benefits of Compounding

The benefits of compounding can be enjoyed to the maximum when you start retirement planning early in your career. Compounding ensures that every dollar of interest you earn on your savings earns more interest. By starting your savings program early you allow your savings and interest to multiply enormously through the effects of compounding.

Research and Identify Best Saving Strategies

An early start gives you the time to research various retirement planning options and strategies before you decide on the one that will suit you best. When you are near retirement you come under pressure to start saving and this could push into many ill advised investment decisions or those that do not yield optimum returns. By starting early in your career you are free to compare different options or even diversify your investment portfolio so that your risk and returns are balanced evenly.

When you start planning for your retirement at an early age you have enough time ahead of you to test your investment strategies and tweak them periodically to get the best returns. When there is a recession in the economy, you can insulate yourself by moving your investments to low risk channels.

In times of economic prosperity you have the luxury of time to opt for a more dynamic investment strategy. By doing so you maximize the returns on your retirement investments and also insulate yourself from the vagaries of the economic cycles.

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