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3 Reasons Why Saving for Retirement Shouldn’t Be Scary

3 Reasons Why Saving for Retirement Shouldn’t Be Scary

Rent. Car payments. Student loans. There are plenty of reasons young adults are often stressed about money.

As a result, the thought of saving for retirement might seem laughable to some 20 to 30-somethings and downright scary to others. After all, the average Millennial has a hard time imagining a time when they won’t have student debt hanging over their head, let alone a time when they can leave the workforce. Plus, who wants to think about retirement when there’s so much life to live now?

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The truth is that saving for retirement shouldn’t be anxiety inducing at all. In fact, beginning your savings early will actually lead to a huge weight being lifted off of your shoulders in the long run. With that in mind, here are three reasons why you should stop worrying about saving for retirement and start doing it.

1. You can get free money with employer matching

If your job offers 401(k) eligibility, there’s a good chance they also offer some sort of employer matching or profit sharing. This is free money! However, in order to get that extra cash, you’ll probably have to contribute a certain amount yourself.

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When it comes to employer matching, every company is a little different. Some might match you dollar for dollar up to a certain amount, others might do 50 cents on the dollar, and still others might do a combination of the two. That’s why you’ll want to find out what the maximum percentage they’ll give you is and how you can obtain that amount. Then all you have to do is sign up.

Keep in mind that, while you’ll always be entitled to any money you put into your 401(k), your employer matching will likely be tied into what’s known as a vesting period. This could mean that you need to be with the company for more than X amount of years before you get to keep their contributions, or you might be able to keep a larger share with each passing year (20% after one year, 40% after two, etc.). Ultimately this could mean you lose out on some of the bonus money, but don’t let that dissuade you from opening an account in the first place.

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2. You can learn about investing

How much do you know about the stock market and investing in general? If you’re like most Millennials, then the answer is probably “not very much.” In fact, you might not even realize that, by having a 401(k) or IRA, there’s a good chance you’re already investing in the stock market.

Depending on the type of account your employer has or the type of IRA you open yourself, your contributions will likely be put into a mix of stocks, bonds, and securities. When you’re younger these investments can be more aggressive, which usually means a higher percentage of stocks that will fluctuate over time. Then as you get older, most people will move their balances into safer investments like bonds or money markets.

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While this process is mostly pretty hands-off, there is still a lot you can learn. For one, by watching your account (but not freaking out about the day-to-day ups and downs), you can see how stocks react to certain events, such as the Brexit or the presidential election. By taking an even closer look at your account, you can also learn about stock dividends and other terms you might have heard by turning on CNBC before the Shark Tank reruns came on. Ultimately this knowledge will come in handy should you decide to really up your investing game and buy stocks on your own.

3. You can watch your early savings grow into much more

The biggest reason to jump into retirement saving as soon as humanly possible is the amount of cash you’ll have saved up by the time you need it. By getting a head start on your contributions and taking advantage of compound interest, your small deposits will amount to a hefty sum that will carry you through the rest of your time on this planet. You’ve probably seen the TV commercial that demonstrates this idea using increasingly larger dominoes. While that’s not a bad comparison, looking at the actual numbers might do more to impress you.

According to hypothetical proposed by Business Insider, the difference between starting your retirement savings at 25 as opposed to 35 could mean you end up with double the amount of money when you reach 65. As they figure, if you started putting just $200 a month into an account with an average return of 6% at age of 25, you’d have just over $400,000 40 years later. However, doing the same starting at 35 would only result in about $200,000. Furthermore, the difference in principal contributed is only $24,000 ($96,000 since age 25 versus $72,000 since age 35). If this doesn’t get you to start thinking seriously about setting money aside for retirement now, I honestly don’t know what will.

Conclusion

When you’re in your 20s or early 30s, retirement is probably about the last thing on your mind. While it might seem strange, these are actually the years you want to not only be thinking about retirement but also start saving for it. Setting money aside for your later years doesn’t mean you’re getting old or that you’re wasting your youth — it just means you’d like to have some money to enjoy life after you’re done working. So what are you waiting for?

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Last Updated on March 29, 2021

Life Insurance: A Secure Way To Protect Your Future.

Life Insurance: A Secure Way To Protect Your Future.

Life is a journey full of ups and downs. No one can actually predict what might happen the next moment; there are times where the happiest moments do not even take a second to turn into the gravest. Planning for your future can help you face such unwelcomed but irrepressible situations with much ease. We all want to make every memorable event of our life more special and to cherish all those moments happily and worry less, you must financially plan your future. But no one has control over life and death. Who would wish to see his family suffer in his absence? Insurance hands over the financial jeopardy of life’s happenings to an insurance company.

Importance of getting a life insurance

No one has control over life and death. Nobody would like to see their family suffering in an absence, and that’s why many people recommend life insurance. A life insurance plan is one of the best ways to secure the future of your family, even against those financial troubles after an untimely demise. These plans are safe and credible, and you could trust them for your family’s better future.

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On the other hand, a life insurance policy is a contract between a company (insurance provider) and policyholder in which the insurance provider ensures to pay a certain amount of money to the nominated beneficiary in case of the policyholder’s death during the term of the agreement. There are different types of insurance plans, and it is important for you to know the benefits of those plans such as a funeral, medical or some life expenses provided they are mentioned in the agreement.

Choosing the right insurance plan

If you’re about to select an insurance plan, you should consider some important factors:

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  • The time at which you start investing in a program and the number of family members you want to get insured. Obviously, a married man with two children has different needs compared to a single one. The number of persons who are dependent on an individual also varies from person to person.
  • The next thing you need to consider is you and your family needs. What are your child’s dream, your retirement plans, for how long would your dependents need financial support, any personal injury, etc. And do not forget those events or situations that will surely demand a huge sum of money.
  • The next thing one must consider is your current income. You should preferably choose a plan which you can afford.

Now you must be having a pretty clear idea of how to choose the best plan for you. Further, you should also compare various plans offered by different companies and numerous sites available online that help will you to compare them.

Differences between life insurance plans

Here’s a short brief of some plan categories you can choose according to your needs:

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  • Term Insurance Plan – You have to pay once, and your nominee gets the paid money under your misfortune demise. It ensures a person for a fixed time. If you survive the policy period, you do not get your premiums back.
  • Whole Life Policy – This plan continues for your lifetime. Under this, the policyholder has to pay regular premiums, until their death.
  • Endowment Policy –  In case the individual dies during the tenure, the beneficiary gets the amount assured. If the person survives the policy tenure, they gets back the premiums paid with other investment returns along with several other benefits.
  • Money Back Policy – In this a portion of the money invested is returned to the investor at regular intervals. If you survive the insurance term you get the entire amount back; else the beneficiary receives the entire sum assured.
  • ULIPs – These are the life insurance plans that offer you future security plus wealth creation options.

Many people do not opt for whole life policy and endowment policy because of the high amount of money you need to pay, while others may prefer to opt for these if they have a high life expectancy. Surely you will find the best one for you.

So what are you waiting for? Plan for your future and live a happier and carefree life today.

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Featured photo credit: aryehsampson.com via aryehsampson.com

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