Why You Should Start Saving for Retirement in Your 30s
Posted on Wednesday, April 5th, 2017 | By IndusInd Bank
Very few people think about saving for retirement in their 20s. This can be due to pre-existing student loans which they have to pay off, or they are simply not earning enough. However, by your 30s, saving should not be an afterthought, but a priority.
Aside from life insurance, you need a little more security for when you are no longer able to work. Moreover, a life insurance will only financially protect your loved ones in the event of your demise. The key is to start saving for retirement early on, so you can have more money to spend post-retirement on things such as medical and household bills. Here are a few tips to help you get started on your retirement plan while you are in your 30s.
Use Compounding Interest to Your Advantage
In a retirement plan with compounding interest, the interest rate keeps increasing exponentially. So the longer you keep funding the plan, the more money you accumulate by the end of the tenure. Over the long run, compound interest will significantly boost your overall retirement fund because it will offer more growth as compared to a simple interest rate plan.
Start Automating Your Savings
When it comes to starting a retirement fund, saving money is everything. Making a habit of saving money will not only help for your retirement, but it will also help in paying your life insurance premiums and other such payments or investments. Investing money in a provident fund is an easy way of automating your savings. However, if you do not have a provident fund, it helps to automate your savings by directing a fixed amount to your retirement fund each month. As your salary starts to grow, aim to add a little more to your retirement fund each year.
Decide What You Want to Pay for First
Many people assume that you have to clear your remaining debts before you can start saving; this is not true. It is simply a matter of deciding which payments to make first. Your other expenses can include debts on a car, a house, a credit card debt, or life insurance premiums. Compare the interest rate on your debt to what you could earn from a retirement fund. If you have a better return on the retirement fund, then your choice is clear.