What’s your plan for retirement?
The day you step away from full-time work for good may feel light-years away, but it will creep up on you if you’re not prepared. All of a sudden you’ll find you are a decade away from leaving the workforce, which doesn’t actually give you a great deal of time to plan and save.
If you’re wondering about the right time to start working on your retirement strategy, here are a few things to keep in mind.
1. It’s never too early to plan for retirement
The more time you have, the more money you can make. Historically, the stock market has seen an average return of around 10%. If you have a superannuation balance of $100,000 and you put away $100 a month for ten years at 10% interest, you’ll finish with $278,499.16. That’s over $165,000 created by time and nothing else.
The sooner you start planning and saving, the more money you will have to retire with. It doesn’t matter how young or old you are, you will never regret thinking ahead.
While it’s easier to make a plan and generate wealth if you start from a young age, don’t decide it’s not worth it if you are already approaching retirement. With the right commitment and advice, you’ll be able to retire comfortably.
Some people believe you don’t need to worry about funding your retirement until you’re in your fifties. Start ten years earlier and you’ll be in a far better position once you turn 65. You may even be able to retire before this age.
2. You can boost your super, starting today
Superannuation was created to help Australians fund their retirement. However, many Australians think of super as ‘set and forget’. They have a job, their employer pays their super and they don’t think much more of it.
No matter who you are and what you earn, you can take better control of your super. This doesn’t mean you have to start self-managing (although it may be an option). Instead, it means making voluntary contributions to your super account. Topping up your super each month will help your savings to grow.
You could consider boosting your super balance through additional contributions, delaying your retirement or selling assets. The good news is additional super contributions can be tax deductible. When you take a long-term view, this can add up to decent savings.
3. You don’t need to be ‘rich’ today to retire comfortably in the future
Compound interest works because it applies to all additional money made from interest. So if you put away $10,000, you get interest not only on the initial investment but also on all the interest it gains. With a fixed interest of 5%, you would only earn $500 a year. After ten years, you would have $15,000. With a compound interest of 5%, after ten years, you would have $16,289. After 20 years you’ll have $26,533, compared to $20,000.
Time is money, thanks to compound interest. You don’t have to earn a multi-six-figure income to save enough to retire comfortably. You just need to start now and commit to putting aside what you can. Compound interest will ensure this money grows.
4. Start with some advice
Your retirement could be whatever you want it to be, it’s never too early to start planning.
Longer lifespans and earlier retirements bring the need to plan carefully and well in advance. One of the most important steps in retirement planning is working out how much money you need each year to a live a comfortable lifestyle in retirement. There is no need to figure this out on your own.
Retirement planning can be complicated and unless you have the proper training and experience, it’s hard to create a strategy that aligns with your income, desired lifestyle and goals. There are also factors to consider beyond superannuation and compound interest, such as investments, property and any money you stand to inherit.
Determining the best plan for retirement requires professional advice. Enlisting the support of a financial planner will help you get all your ducks in a row so you can enjoy the lifestyle you’re looking forward to after you finish work.
If you’re wondering when to start planning for retirement, the answer is today. Start your journey by reaching out to Edge Advisory Partners.