Sep 18, 2019 |

6 Reasons to Start Retirement Planning Early

Whether you’re still early in your working life or you’re getting closer to the retirement stage, it’s never too early to start thinking about retirement planning.

The earlier you integrate retirement planning into your overall financial plan, the faster you could reach your retirement wealth goals.

There are many reasons why you should consider retirement planning early, including some specific benefits early planning can reap for you.

1. Ensuring your quality of life

Taking charge of retirement planning sooner rather than later gives you the best foundation to make sure you can afford to retire. Also, it maximises your chances of building up sufficient funds to maintain the lifestyle you want to live. As you shift from the accumulation (earning) phase into the distribution (no earnings) phase of your life, you’ll need to have enough savings, investments, and/or assets to cover all your expenses.

It’s common for people to underestimate their retirement requirements, when they might need as much as 80% to 90% of their pre-retirement income to stay comfortable. A detailed retirement plan can incorporate sources of income, projected expenses and savings, and expected asset growth. It should be modelled on realistic figures for future cash flows so your expected retirement income is as accurate and realistic as possible.

Start with a clear, focused retirement plan based on your goals and desired retirement living standard, and you can begin to save and invest wisely now – ensuring you have enough when the time comes.

2. The power of time and compounding

Thanks to the magic of compounding and time, a near-impossible financial goal requiring significant effort could be achieved with minor compromises and inconveniences today – if you start earlier. As an example, skipping your weekday coffee (spending $5, five days a week) compounds (monthly) to a staggering $132,204 at 7% over 30 years.

Now is the best time to start saving so you can leverage the longer time horizon for compounding. Rather than putting off saving and investing for retirement until the kids have grown up or you’ve paid off the house, start earlier and the journey could be much easier. The more time you give yourself to save, the less effort you’ll need and the lower your risk is for missing out on your ideal retirement lifestyle.

3. Seize wealth-generating opportunities at each life stage

The earlier you start with exploring wealth-generating options, the more flexibility and choice you could have when it comes to growing your assets. These opportunities can change at different life stages, when your tax profile changes and when your risk tolerance changes.

For example, if retirement is 30 or 40 years off and you have extra money, you could be justified in investing in riskier investments with potentially higher returns. Working with an experienced financial planner enables you to explore different wealth-generating opportunities and investment products – from annuities and shares, to property.

4. Mitigate against unexpected events

Unexpected events can happen at any time and starting early with retirement planning gives you a good foundation for mitigating and recovering from these unexpected circumstances. Integrating retirement planning early into your ongoing financial planning could better protect you against financial catastrophes and other unforeseen circumstances. For example, major trends like inflation and economic downturns can severely erode or devalue your investments, but if you allow enough time for recovery, you could still achieve your retirement planning goals in time.

On the other hand, some people could overestimate their ability to continue working, when they might need to leave the workforce due to injury, poor health, or sick family members. A comprehensive retirement plan, implemented early, could provide more scope for addressing these unexpected disruptions.

5. Take advantage of government incentives

While benefits like the Age Pension alone are unlikely to give you a comfortable retirement, they can be used to complement your retirement strategy. The earlier you start, the more you could stand to gain with approaches like salary sacrificing into your super and government co-contributions.

These superannuation-boosting and tax-effective strategies can help you maximise your superannuation balance and have it working harder for you earlier.

6. Stay focused

Retirement planning is all too easy to put off, particularly if retirement seems a long way away and you have more immediate priorities like home loan repayments, holidays, and a growing family. However, if you integrate retirement planning into your financial planning arrangements as early as possible, you can stay focused even with competing priorities.

With a written, specific retirement plan, you can find it easier to balance your immediate lifestyle expenses with saving more and building wealth for retirement. You can make adjustments as laws, opportunities, and other circumstances change, to ensure you stay on track.

Start your retirement planning today

Running out of money after you stop working could mean poverty, hardship, and inability to meet healthcare expenses. However, if you start planning early with the help of an experienced financial adviser, you can maximise your chances of maintaining a great retirement lifestyle, free of debilitating financial worries and disruption to your retirement years.

At Prime, we can assist you with designing the retirement lifestyle you want and putting your savings to their best use. Find out more about how our financial planners can help you with retirement planning by contacting us today.


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A unique and personal service approach to support all your business advisory and personal wealth management needs.

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