Deep, deep dive
Why is planning for your retirement early important?
Planning for your retirement is important because you don’t want to retire and not have enough money to meet your daily needs. Plus, you probably want to have some fun too, so you’ll also need to save up for that as well.
And don’t forget that costs to maintain your lifestyle will go up due to inflation, so the amount you set aside will have to take inflation into account as well.
This is why saving for your retirement beforehand is really important because of the magic of compounding. While a return of 5% a year might not sound like a lot, if you start with RM1,000 with an annual compounding interest of 5%, in 30 years it’ll become more than RM4,000!
This is because the interest you earn on your initial savings increases the total savings you have each year, which means your savings will snowball on their own. This means you’ll achieve your savings goals faster.
It also means that your savings will grow faster than inflation, meaning it won’t lose value over time as costs increase.
So how do you plan for your retirement?
There’s no magic retirement plan that will fit everyone’s preferences. Some would like to spend it relaxing, spending time with friends and family. Some would like to engage in more expensive hobbies, such as golf or photography. So really, retirement planning will be different for everyone.