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This week, FoxPlan financial adviser Richard Renfrew discusses when is the best time to start saving for retirement. Follow Richard on LinkedIn HERE.
There will never be a better time to start saving for your retirement than today. What stops so many people however is that they make retirement saving an all or nothing concept – balancing your priorities is critical.
The first step is to have clarity of vision. What is it you want now and what do you want in the future? A lot of advisers will say save as much as you can – but your savings are unlikely to be sustainable if you take the ‘style’ out from your lifestyle. Ultimately, people need to have an enjoyable and sustainable lifestyle in order to continue saving.
Next, it’s important to understand the concept of compound interest. Was your Saturday night just past an $80 night out, or was it actually a $320 night out? When you save for retirement through a managed investment fund (such as KiwiSaver) you gain the benefits of compound interest. This means even taking tax into consideration, an investment yielding 12% will double your money every 10 years. If you have 20 years before retirement – every dollar you invest now will be worth $4 when you retire. Understanding compound interest makes you value things differently.
A no brainer to improve our retirement is also to take advantage of your ‘free money’. These are funds you can leverage to grow your investment portfolios, such as employer and government KiwiSaver contributions.
Bringing it together
When we know what we want, understand the power of compound interest and are taking advantage of the savings benefits out there it then is about bringing it all together with a plan. Taking the time to plan exactly what you need in retirement and reviewing your position today.
The earlier you start your plan, the easier it will be.
If you’d like to talk more about planning, drop us an email at email@example.com.