When you are still in your 20s, the idea of retirement seems too distant in the future. While retirement itself is far off the horizon, anyone who nears retirement age or is retired often emphasises the importance of starting early on retirement planning for young people.
They push and encourage the younger generation to think more about retirement.
For most of the younger population, the idea of sitting on a pile of money you can’t spend until you’re old seems like a joke, but that is not the case. As Alister Clare, UTE loan financier and specialist at Credit Capital, said, ‘In the grand scheme of things, your retirement fund will be your financial crutch in your golden years.’
Aside from knowing what you can about superannuation funds, it would be best if you started actively planning your retirement. To help you understand more, here are a few reasons you should start thinking and planning your retirement.
Compound Interest is probably the best reason for starting early on your retirement planning. It is the process wherein a sum of money grows substantially because of interest that builds over time.
It means that the earlier you start, the longer your money has to compound and grow for you. If you have access to some employer-based retirement plan, it is best to take advantage of it! Several employers match a few of your contributions, which gives your savings an extra boost.
One great advantage in planning early is that you can also quit work early! Saving and planning financially at a young age gives you the chance to save more. This allows you the opportunity to willingly and safely retire early without having to worry if you saved enough.
Also, the average retirement age is younger than the actual retirement age. In Australia, for example, several people retire starting at age 55. Most that retired early do so due to negative or unexpected reasons, such as disabilities or health problems.
It is hard to tell or predict what the future holds, so the prospect of investing early in retirement planning for young people is most advisable.
An uncertain future should be enough to scare someone to start prioritising and planning their retirement savings, even at a young age. It’s hard to assume that you will continue getting a high income for the rest of your life. There will always be the threat of an economic downturn or layoff.
Unreliable Retirement Funds Don’t Usually Last.
Your retirement savings or superannuation fund might seem like a hefty amount that could last for a long time, but don’t let the digits fool you. While it might seem a lot at first, this money doesn’t exactly last forever.
For instance, a superannuation fund with a value of $1,000,000 can last 12 years if you have a drawdown amount of $100,000 indexed each year. It could last for 16 years if the drawdown is $80,000 and up to 24 years for a $60,000 drawdown.
Having a financial advisor or using a trusted savings calculator can help you find a more fixed answer.
Thinking about how to quit work early or starting a long-term financial plan or retirement fund is not exactly on top of young people’s current list of things to do. Hiring a financial adviser is just too expensive for the younger population. Fortunately, there are some products and services available that you can use in the meantime while you save up for one!
You can use Financial Mappers—a software created and targeted for the use of both financial advisers and DIY investors—to start! Once you have secured enough funds, you can use Financial Mappers to find a financial adviser to assist you in financial planning and building an effective retirement plan to make it last!
Are you ready to start your Financial Plan so you can retire early?