Saving for retirement: when to start
We know that ceasing work can be an emotionally charged and daunting proposition. Ensuring you have complete confidence that your financial resources will allow you to live the life you really want to live can make a big difference to the quality of life you actually experience.
Can you believe studies conducted by HSBC have indicated that 60% of working people have received some advice on retirement, but 29% only referred to friends and family – not industry experts. Over the last 40 years, we have observed a great deal of concern from our clients that they will not achieve their goals in life… but that’s where we come in.
We’ve said it once, and we’ll say it again – confidence comes from knowing where you are and where you’re headed. The sooner you understand your goals, have a plan in place and start saving for retirement the better.
By starting to save for retirement in your twenties or thirties, you will be giving yourself an extended timeline to hit the same goal, compared to if you started in your forties or fifties. If you develop a retirement plan or wealth management plan, you will then be able to move forward with certainty and enjoy a more relaxed transition to retirement.
Statistically speaking, we have greater disposable income between the ages of twenty and forty than ages fifty and above. This aligns with when our financial responsibilities are the least, before the inevitable time comes that our financial responsibilities increase – be it home mortgage repayments, health care, family expenses or loss of income. Establishing good saving habits will be easiest when your discretionary income is at its highest and your expenses are at their lowest.
Not only will starting to save for retirement in your twenties or thirties instil positive budgeting and saving habits early on, but you’ll also reap the rewards of compound interest. This is the biggest benefit as the interest you earn will be building on itself over time. This means you can afford to save less money per month than if you started saving in your forties or fifties, or save the same per month and be better off in the long term.
Depending on the risk profile of your investment portfolio, the sooner you start the greater the opportunity you have from investing, and the more time you have to recover from any potential market losses.
Whilst we can’t predict the future, we can definitely plan for it (and have contingencies). Subject to how you enact your retirement plan and how often you review your cash flow mapping, you might even find yourself in a better position than you were working towards… meaning you can retire earlier than planned! Now that sounds like something we can all agree is a richer experience of life.