If you are still in your early 20s, the thought of retirement planning may not even have occurred to you yet – but it should. You will eventually start wondering when you should start retirement planning. The simple answer to that questions is – as soon as you can. Although you may not be thinking about, much less focusing on, your retirement years while still in your 20s, the reality is that it will cost you a considerable amount of money to live comfortably during your “Golden Years” and you cannot count on Uncle Sam, or an employer, to cover your expenses. Therefore, retirement planning should be part of your overall estate plan as soon as possible.
What Will Is Cost You to Live Comfortably as a Retiree?
If someone could tell you, with absolute certainty, how much you will need to live comfortably throughout your retirement years, that person would likely write a book, get rich, and retire himself/herself. There is certainly no shortage of experts willing to chime in and give you an estimate of what retirement will cost you; however, none of them can be certain because there are simply too many variables, including your own longevity. Another important factor when trying to calculate the cost of your retirement is whether or not you will need long-term care. With average yearly costs in North Carolina of around $90,000 and predictions that put those costs at $215,000 a year in 30 days, it becomes easy to see how you find yourself without sufficient funds to truly retire and enjoy those Golden Years unless you start planning now.
Starting Early Has HUGE Impact on Your Retirement years — An Example
Like most people, you are probably aware that the earlier to start saving money, the more the money grows. Knowing this in the abstract, however, and actually seeing the figures in black and whole, are two different things. Consider this example:
Imagine that you begin to work on your retirement plan savings at age 25 by putting $3,000 a year in a tax-deferred retirement account for 10 years, until you reach age 35. Further assume that you stopped adding to your account that that time. Using a 7 percent interest rate, your $30,000 investment will have grown to more than $338,000 by the time you are ready to retire at age 65 – despite the fact that you didn’t contribute anything past age 35!
Conversely, let’s say that instead of stopping at age 35, you start saving for your retirement at that age. If you contribute the same $3000 per year for the next 30 years, you would assume you will have more money when you reach retirement age right? After all, you saved for 30 years instead of just 10 years. Interestingly, the reality is that while you would have saved a whopping $90,000 of your own money under this scenario, it would only have grown to $303,000 – a whopping $35,000 less than if you had started saving ten years earlier but also saved for 20 years less!
Retirement Planning and Estate Planning – How They Go Together
Regardless of how old you are when you start retirement planning, be sure to discuss your retirement planning goals and strategies with your estate planning attorney. Ideally, retirement planning will become a component of your comprehensive estate plan because the two are clearly interrelated. For example, when you are young and have yet to amass significant estate assets, your estate plan will likely rely heavily on life insurance; however, as your estate assets grow in value, your need for life insurance will decrease. The best way to ensure that your retirement planning efforts are in line with your overall estate plan is to work closely with a North Carolina estate planning attorney.
If you have additional questions about retirement planning and/or estate planning in the State of North Carolina contact the experienced estate planning attorneys at The Law Offices of Cheryl David by calling 336-547-9999 to schedule an appointment.