When to start retirement planning?
When we’re young we think retirement planning is the last thing on the list to worry about, but later on we often wonder if we started planning too late.
So when should we start? – now, soon, whenever you can – there are different things to do at different times to help your financial future.
You’ve just started your career, finally starting to earn decent money but putting away money that you can’t touch for decades just doesn’t sound appealing. Well small changes can have a big impact, assume you just put $30 in your super each week and received a 7% return on it. Over the next 20yrs that adds not just $31,200 from your contributions, it will add in total $64,069 in interest payments. That’s $32,839 in 20 years that you didn’t have to work for. This doesn’t take into accountant any fees but gives you an idea of how something so small can grow over time. There are many online calculators that you can use to work out a suitable repayment for yourself and the return it could make with.
In your 30’s lots of expenses, commitments and goals can occur and super can often be last on the list again. Children, home loans, financial responsibilities, all of these can defer you from putting into your super but just like your 20’s making the effort to continue regular payments means you will continue to take advantage of that compounding interest.
Your 30's is the time to work on paying off any debts or mortgages you may have. The first 5 to 8 years of repayments for a typical loan go towards paying off the interest, so anything extra you pay of top of that can reduce your interest payments and loan length in the long term.
This is also a good time to review your superfund to make sure you are getting the most out of your savings. Things to look at is your fees and investment returns.
Most people by now have super a little closer to the top of the list. If you haven’t started planning for retirement yet you might want to take some time to set a serious action plan in place. Things you need to think about is when do you want to retire? What type of lifestyle do you want to live in retirement? How much will it cost? What current debt do you have? What do you want to leave for your children?
Something to think about: The Association of Superannuation Funds of Australia (ASFA), states that a couple would need around $60,000 a year for a comfortable lifestyle. For 25 years of retirement that would require $1,500,000 in retirement savings.
Retirement is just around the corner, if you are parents then your kids are starting to move on and hopefully your mortgage is almost paid off, so now is the time to focus on your super.
Maintaining a diversified portfolio is more important than ever as now your super balance and investments are at their highest, meaning a negative return now is a much greater loss than it used to be. This might mean as you approach retirement you may want to consider keeping the majority of your money in non-risky investments. Working with a certified financial planner can be a very good idea to ensure you are doing everything you can to safeguard your balance.
If you haven’t done so already making additional super payments to take advantage of the 15% concessional tax rate on super contributions up to $25,000 is a good decision.
Welcome to the retirement transition stage. You need to consider when you want to retire and when you can retire. The longer you stay working or part working the more retirement savings you will have overall. Hopefully from years and years of planning the transition to retirement is smooth.
Now you made a plan for retirement life and you allocated for it so don’t throw it away and go in cruise control. Stick to your budgeted lifestyle, continually evaluate your investments and monitor your spending.
Just remember it’s never too late – if you start planning late then just make sure you are saving every penny you can. Maybe take on an extra job, it will be easier to sacrifice now compared to later. Seeking advice from a Financial Planner is also a good idea to ensure your hard work is paying off. The information in this blog is provided for general use only and cannot be construed as advice. If you are interested in seeking advice and strategies, Peer Wealth’s certified financial planner Doug Atkinson offers retirement planning sessions.