Retirement is a major life transition, and the earlier you start planning, the better prepared you’ll be for a smooth, comfortable post-work life. Early planning allows you to take advantage of compounding investments, build a strong financial foundation, and set clear goals for the lifestyle you want in retirement.
When Should You Start Planning?
The best time to start planning for retirement is as soon as you begin earning an income. The earlier you establish your goals and put a plan in place, the better positioned you’ll be to achieve the retirement lifestyle you desire.
The primary advantage of starting your retirement planning early is the ability to benefit from the power of compounding. When you invest or save over a long period, your money grows not just based on your initial contributions but also on the returns those contributions generate. The longer your investment horizon, the more time compounding has to work its magic.
Starting early also allows you to adopt a more balanced approach to saving and investing. You can contribute smaller amounts consistently over time, rather than feeling the pressure to save large sums closer to retirement. This is often less stressful and more sustainable, enabling you to manage current financial responsibilities, like paying off a mortgage or supporting children, while still building your retirement nest egg.
How Much Will You Need?
One of the questions we get asked the most is “How much will I need?”. The answer will depend on a variety of factors, such as the lifestyle you envision and any changes in your spending habits during retirement. For example, you may expect lower expenses once you have paid off your mortgage or reduced work-related costs, but you may also want to travel more frequently or take up new hobbies.
For many Australians, superannuation is a critical source of retirement income. The earlier you start contributing to your super, the more money you will have when you retire. Voluntary contributions can help boost your super balance and offer tax advantages, particularly for higher-income earners.
Maximising your concessional and non-concessional contribution caps each year is a valuable strategy to grow your super. The current concessional cap is $30,000 annually, while the non-concessional cap is $120,000.
The Importance of a Financial Plan
Creating a solid financial plan is essential for long-term security and peace of mind. A well-thought-out plan not only helps you grow your wealth through investments but also ensures that you’re prepared for any future expenses, such as healthcare or aged care, without compromising your current lifestyle.
By starting early and budgeting for the life you want in retirement, you can enjoy your golden years free from financial stress, knowing that you’ve taken the right steps to secure your future.
Our expert advisors are here to help you build a financial roadmap that ensures a secure, fulfilling retirement. Get in touch with us today on 1800 988 522 or cnis@cutcher.com.au
Wade is the head of the Investment Services division at Cutcher & Neale and has over 15 years of industry experience in accounting and investment advisory roles.
Wade guides his division on the belief that investment portfolios should be built on transparency and flexibility. His expertise focuses on direct portfolio exposure to both Australian and Global Investment markets.
