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Why financial planning for retirement is essential

Despite the desire to one day stop working, many Americans do not begin financial planning for retirement until they have been working for several years. With the high cost of living, it is important that people start saving money as soon as possible for their lives after they finish working. A recent study shows that approximately four out of five full-time employees have access to a company-sponsored 401k or similar investment strategy. On the other hand, more than four in ten Americans do not have a pension or long-term savings. No matter what your method of saving is, there are numerous reasons why you should start today.

you will live longer

In 1950, when much of the baby boomer generation was born, the average life expectancy for an American was just over 68 years. As of 2010, that number has risen to 78.7 years. So what does life expectancy have to do with financial planning for retirement? The longer you live, the more money you will need to survive. In 1950, if you retired at age 50, on average you needed enough savings to live another 20 years. Today you need enough savings for about three more decades.

Social security is not enough

The average American who receives Social Security receives about $16,000 per year, or about $1,250 per month. For the vast majority of Americans, this is not enough money to live comfortably. Also, you cannot start receiving social security benefits until you are at least age 62. That means if you retire early, you’ll have to rely entirely on your own personal savings, 401k, or pension.

Retirees face higher health care costs

Along with regular expenses like mortgage payments, groceries, insurance, and entertainment, retirees also face the rising cost of health care. In addition to health insurance premiums, an American couple of retirement age, say 65, can expect to pay nearly $600 per month on average for routine medical procedures, checkups, and medications. At age 75, that cost will be more than $700 per month.

retiring should be nice

So far we have discussed all the negatives associated with not having proper financial planning for retirement. Now let’s see what you can do with a secure plan. As mentioned above, people are living longer lives than ever before. This, together with the lack of work, means huge amounts of time for leisure activities. If you’re financially secure, this can mean visiting out-of-town relatives regularly, taking vacations across the country and the world, and even enjoying high-end restaurants on a regular basis.

In short, retirement financial planning is a must for a healthy, stress-free and timely retirement. The earlier and more you save, the less you’ll have to worry about in your later years.