Am I too young to start planning towards retirement? - Blog

Many people in their twenties think they are too young to start saving for retirement. After all, who wants to grow old? Not many of us. However, in the long term, waiting a few years to start can make a huge difference. In our blog titled how to retire as a millionaire earning minimum wage we show you how much you could save every month.

For example, if you start saving for retirement at an early age of 25 years and save about €500 per month and earn 6.5% annual investment returns, your investment will accumulate just over €1 million euros by age 65.

If you start at 35, you will need to save over €11,500 per year to achieve €1 million (if you are planning to have that amount at the start of your retirement) by the time you get to 65 years of age and assuming the same investment returns.

You might think you can sell your home one day and then use the proceeds to finance your retirement. You will not be able to invest all the money you receive for your retirement income because you still need to a place to live which you will probably buy or rent. This can deplete your savings. Having a second property that you can rent out can provide an extra income during retirement.

BUDGETING AHEAD

Most people often think that their everyday expenses will be much less when they are old but sometimes the expenses are often higher due to medical or health care expenses that increase as we age. People want to do things to maintain their lifestyles such as travel, and these all costs money too.

It is very important to start budgeting now for retirement no matter your age. As Blackrock identified that budgeting your spending in retirement is similar to how you did your budgeting in your working years. Expenses are likely to change over time and you might need to adjust your retirement income plan to reflect these changes. Meet with a financial professional to help you plan ahead no mater your age.

NOT INVESTING TOO CONSERVATIVELY

Investing conservatively for your retirement at a young age is not ideal. Conservative investments are cash and money market instruments. Your portfolio should ideally contain a sizeable investment in equities.

Equity securities, such as shares, have higher risk levels when compared with government bonds and bills, they earn higher rates of return to compensate investors for these higher risk levels, and they also tend to be more volatile over time. Be aware of your constraints such as time, liquidity needs, tax, legal and regulations.

Get professional advice from a qualified and regulated financial advisor (preferably a fiduciary) who can analyse your needs and create a tailor-made plan specifically for you.

HOW TO START TODAY!

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