Saving money for retirement actually means setting aside a part of your monthly salary towards funding your lifestyle after retirement.
This is the right thing to do because most retirees become unemployable and unproductive after retirement.
Consequently, when done right, a good retirement savings culture can pave the way for proactive employees to have a better retirement life financially.
Unfortunately, many retirees discover too late that their retirement savings plan do not have sufficient funds in it to fund their retirement lifestyle.
There are several reasons why this is the case.
First, many company employees start saving money for retirement when it is about 5-10 years before retirement.
10 years savings may not be sufficient to cater for all of the expenses expected to be incurred for, say, 20 years of retirement life.
Therefore, we encourage proactive employees to start saving money for retirement immediately they secure a job.
This means, on the face of it, that you need to save for about 20 to 30 years if you intend to be financially free for another 20 to 30years of your post retirement years.
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Here's a second thing to remember.
Many retirement savings plan (or savings account) pay less than 7 percent interest rate per year, depending on the country where you live.
In practice, this means that if you save, say, $10,000 per year in your retirement savings account, your bank account will grow by less than $700 in an entire year if the interest rate is less than 7 percent.
If you live in a country where inflation is greater than 10 percent year on year, you will find that your retirement savings actually loses money year on year.
This means that the purchasing power of the money you're setting aside for retirement is actually depreciating with time. And your retirement savings could be about half its original value by the time you actually retire.
Saving money for retirement is great. But as shown above, simply setting money aside in a savings account is unproductive.
To get the most value for your savings, you must save with a view to investing those savings in investment opportunities that offer far higher return on investment than a bank savings account offers.
At the very least, you should be looking at investment opportunities that offer anywhere from between 15 to 30 percent return on your investment.
30 percent return on your investment means that if you invest $10,000 in the investment opportunity, you are assured of getting $3,000 per year.
A 30 percent return on investment also means that your investment will be growing at a rate greater than inflation. Therefore, your money is actually growing with or without inflation.
From the above it is obvious that the ROI for the stuff you invest your retirement savings in, the more money you will have available to you after retirement.
Since that is the case, many employees have been attracted to investment opportunities that promise as much as 100 percent return on their investment in 60 to 90 days.
That level of return is rarely paid by credible investment organisations anywhere in the world.
Employees who are attracted by such offers suddenly find themselves in the realm of what is called Get Rich Quick (GRQ) Schemes. And thousands of employees have lost their hard money to such pyramid like schemes parading as credible investment opportunities.
So, be cautious when choosing the investment opportunity to invest your retirement savings in. Always err on the side of caution.
If an investment opportunity sounds too good to be true, it probably is.
Saving money for retirement is not easy. It requires discipline and a commitment to a better retirement life to set aside money for your retirement month after month especially when retirement is still far away.
But this high sense of discipline is required to secure your financial freedom after retirement. So, go for it.
Define what percentage of your monthly salary you wish to set aside every month toward your retirement investment plans. And stick to it.
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