It sounds terrible to have to start planning for when you end your career as soon as you start it, but, in the end, saving for your retirement is an essential part of everyone’s life—one that becomes more and more pressing every year. Statistically, an average of between 60% and 70% of Australians save towards their retirement, leaving about 30% to 40% of Australians who don’t.
When retirement comes, the individuals who don’t save often need their kids to support them financially, or they must continue working. We don’t know about you, but we surely wouldn’t want to have to do this at the age of 65. So, here’s how and why you should start saving for your retirement as early as possible.
Start by making a retirement plan
The first step to planning for your retirement is putting a practical plan on paper. When it comes to retirement planning, there are a few things you’ll need to consider, such as the timing of your retirement, what lifestyle you’d ideally like to lead during retirement, possible income and expenses during retirement, and continual planning for the future. Let’s take a closer look at these factors:
When do you want to retire?
First up, let’s decide when you’d ideally like to retire. Most retirement plans set 65 as the age for retirement. There are a few reasons for this. For one, this is generally considered the age at which people can safely work. Secondly, it allows for sufficient time for your retirement to compound successfully, leaving you with a larger amount to live on until retirement. However, you could retire at any age actually.
Some retirement plans might limit your retirement ages, only allowing you to access the amount after a certain age to ensure it’s worthwhile for both parties. Regardless, you’d need to decide with your partner when you’d ideally like to retire and plan accordingly for that age.
Retiring early would usually mean that you’d need to save more every month to achieve the exact amount you would need to survive on for the rest of your life from your selected retirement age. So, it’s important to factor this in as you decide.
What lifestyle would you like, and what are your priorities?
It’s generally suggested that you start saving for retirement as early as possible. In your 20s, it is challenging to set your priorities for retirement because you don’t know what you’ll need in the next 40 years. However, some general guidelines can help you. Think about the following:
• The expected standard of living. Usually, retirement planners can give you an expected calculation of the essential cost of living in 40 years. It’ll only be an estimate, but it would be enough to work on
• What you’d like your social life to look like
• How you’d like to stay healthy and active
• Considering insurance for your health needs
• To what extent you’d like to support your children and grandchildren
You might own a business by reaching retirement age and still be fit enough to work. If this is the case, you could still continue working and earning a salary while paying more into your super fund.
What would your living expenses be, and what income would you need?
Based on the rough estimates given regarding the value of money when you reach retirement age, you’d want to set aside enough money to live comfortably. Create an estimate of how you’d like to live and what your potential expenses might be, and factor that into what salary you would need to sustain this standard of living. This will be the deciding factor on how much you need to save every month for the amount of years you have before you reach retirement age.
Plan for the future.
Once you hit retirement, that doesn’t mean you can or need to stop planning for the future. Whether you take out a lump sum from your super fund or opt for a monthly salary, you can continue investing that income so that it grows. Budget like you would when you were working. Allocate funds to investing, saving, paying off debt, and living expenses. Receiving your retirement might offer you more usable capital to bolster your investment portfolio. Be wise about how you use it.
Hire a retirement planner
Finally, hire a retirement planner to help you manage your retirement portfolio and decide how the money is used. Some people plan for retirement so well that they’re left with more than enough to survive, often leaving a substantial amount for the kids. A retirement planner can help you navigate how this money is allocated to your kids and how they should use it.
Final Thoughts
Aside from providing financial security in your old age, saving for retirement also offers you some tax benefits that’ll save you a few pennies over the years. Consider the lifestyle you want in your old age and put the proper measures in place to start saving for it today. Trust us, by your retirement, you won’t regret it.
Source: Cosmo Politian
