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What Age Should You Start Planning for Retirement?
Whether retirement is just around the corner or a distant blip on the horizon, you may have wondered when the best time to start planning for it is. It’s a major milestone that shapes your golden years, so it’s worth thinking about!
There’s no magic “perfect” time to start planning, but the earlier you start, the better. Don’t get discouraged if you’re starting later – it’s never too late to make a plan! But there are some definite perks to getting a headstart.
The financial advisers at Lester Brunt have helped countless people reach their retirement goals. Below, we’ll look at the benefits of early planning, what to do if you‘re already nearing retirement age, and how to find the right starting point for you.
Why Is It Better to Plan for Retirement Early?
Planning for retirement early can pay off in a big way, both for your wallet and your peace of mind. Here’s why:
Compound Interest
The earlier you start saving and investing, the more time and potential your money has to grow through compound interest. This means your earnings accrue interest on the interest, snowballing your nest egg over time.
Let’s say you and a friend are both interested in saving for retirement. You start saving £100 every month at age 20. Assuming a steady 6% annual interest rate compounded monthly (which means the interest is calculated on your growing balance, not just the initial amount), by the time you retire at 65, you’ll have accumulated around £386,000. Over 45 years, your consistent contributions of £100 grew significantly because you gave them more time to earn interest on the interest.
On the flipside, your friend waits until they’re 40 to start saving. They decide to be more aggressive and contribute £500 a month at the same 6% interest rate. By retirement at 65, they’ll have saved around £237,000. Even though they saved more per month for a shorter period, they missed out on the major advantage of early contributions gaining interest over a longer time horizon.
These figures are examples only and they are not guaranteed – they are not minimum and maximum amounts. What you get back depends on how your investment grows and the tax treatment of the investment. You could get back less than this.
Flexibility
Early planning allows you to adjust your savings strategy as your income and life goals change. You can decide if early retirement is truly what you want, or if you’d prefer a more gradual transition. You’ll also have more control over your lifestyle choices in retirement if you have a healthy nest egg.
Peace of Mind
Worrying about having enough saved for retirement can add stress to your life. Being financially prepared can ease that burden, letting you focus on enjoying the present.
Is It Too Late for Me to Plan for Retirement?
It’s never too late to plan for retirement. Even if you’re in your 50s or 60s, saving money now can still make a big difference thanks to the power of compounding interest.
Planning also involves thinking about the lifestyle you want in retirement, where your income will come from, and how you’ll manage healthcare. These aspects can actually be easier to plan for when you’re closer to retirement age, as you’ll have a clearer idea of your options.
When Should I Start Planning for Retirement?
While it’s generally best to start planning early, the right time for you depends on your lifestyle, income, and goals. Here are some questions to help you get started:
- What age do you ideally want to retire?
- What lifestyle do you hope for in retirement? Travelling extensively will require a different nest egg than staying home and gardening.
- Do you have any health concerns you need to deal with?
- How much have you saved already?
- What are your expected sources of retirement income? This includes pensions, Social Security, and any investment income.
- What are your current debts and ongoing expenses?
- How comfortable are you with investing? Understanding your risk tolerance will help you decide how to allocate your retirement savings.
By answering these questions, you’ll get a clearer picture of your savings target and timeline. It’s also a good idea to talk to a financial adviser for personalised guidance on retirement strategies.
Secure Your Financial Future With Retirement Planning From Lester Brunt
No matter how close you are to retirement, Lester Brunt’s expert advisers are here to help. We’ll analyse your situation, consider your goals, and leverage our experience to craft a plan that gets you there. We offer a full range of retirement planning services, from building a new strategy to fine-tuning your existing one, and will work tirelessly with you to achieve peace of mind.
Located on the South Coast, we serve clients across the south of England. Book a no-obligation consultation online or call us on 01202 695 801 to get started!
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select, and the value can therefore go down as well as up. You may get back less than you invested.
Written By Ellis Mallett
Chartered Financial Adviser
Lester Brunt Wealth Management
Lester Brunt Wealth Management is a trading name of Lester Brunt Wealth Management Ltd