You are never too young to start planning financially for when you are a senior or for old age.  We all plan to reach our senior years and it’s important we take care of financial planning for this era before we get there!  

The need for financial planning is important for everyone. But, as we all know, it becomes more crucial as we grow older. The following article will address the importance of financial planning and the steps that one should take before retirement to ensure we each have a secure future.

What are financial plans?

There are two types of financial plans: short-term and long-term. Short-term plans include your monthly bills and payments, which need to be paid on time to avoid penalties and late fees. Long-term plans include your retirement plan, savings for holidays or other things you want to do in the future, etcetera. You should make sure you are taking care of both your short-term and long-term needs - otherwise the present will become the past before you know it!

In the late stages of life, many people are unable to take care of themselves. In this case, it is necessary to have a long-term care strategy in place. This will help in making the transition from retirement to old-age less stressful and more predictable.  Ultimately, you need to save money to fund your retirement and there are many ways to do so.

Why do you need to start saving for retirement now?

In order to be financially independent when you retire, you need to start saving for retirement today. The earlier you start saving for retirement, the more money you will have in your account when it’s time to retire.

The longer you wait, the more money you need to save and the more interest it will cost you. This is because of compound interest which is a math formula that takes investment growth into account by making future cash flows grow exponentially. So the longer time passes without saving, the higher your monthly contributions will be in order to get the same amount of money out in retirement.

Every year, the number of people retiring increases and the number of people working decreases. More and more people want to retire early.  This means that there’s going to be a lot more retirees in comparison to workers in the future, which will put a lot of pressure on social security. If we don’t start saving for retirement now, we might not have enough money when it comes time to retire.  Relying on a state pension might not give you enough finances for a sufficient or comfortable retirement. 

How to save for your senior years and old age

There are lots of ways to save for retirement from workplace pensions, private pensions, government bonus savings schemes, investing in stocks and shares and even in your own property.  Quite often, people choose to climb the housing ladder throughout their younger years and then downsize dramatically once reaching senior years to release the equity for retirement and a mortgage-free life. It can be ideal to use a few different methods to fund your retirement and ensure you have plenty of financial security.

How much should you save for retirement?

As you get closer to retirement age, you may start thinking about how much money you need to have saved in order to retire comfortably. The amount of money that is right for one person may not be the amount that is right for another. You need to take into account your current income, your savings rate, your tax rate and inflation when calculating what your retirement nest egg will be.

You also need to consider whether you’ll maintain a car when you’re older, if so then you need to factor in senior driver car insurance costs as well as car running costs and maintenance.  How will you fund a car? Will you buy a used car, or do you plan to use car finance for a new car every few years?  Make sure you factor in exactly how you see your retirement, down to the car you want to drive, so you can start a financial plan that will satisfy your retirement wants and needs.

What about days out, weekend trips and holidays?  You’ll need to save enough for these too.

It will also depend on how long you plan to work.  Some people choose to part retire, some early retire and others continue to work.  It may be that you have a mortgage until you are 70 years old and need to continue working to pay for this.  

Hopefully, you’ll be mortgage-free when you retire, but if not you’ll need to factor in any mortgage or rent costs, regular household bills and food shopping as well as any other outgoings such as life insurance for seniors or health care costs.

Start planning for your senior years as early as possible

As you can see there are a lot of factors to consider.  Everyone’s situation is different, but the best thing you can do is to make a plan as early as possible for when you want to retire and how you want to live when you retire, then you can save appropriately. You can also seek professional financial advice for how best to save your money and invest for your later years.

Although you’ll still have lots of outgoings when you retire, you’ll also be able to take advantage of lots of money-saving perks for seniors!