At What Age Should You Think about Retirement Planning?
One of the biggest and most important investments any of us will ever make is for our own retirement years.
The amount of money you have available at this time will make a huge difference to your quality of life when retired. So when should you start your retirement planning in order to get the life you want after giving up work?
The first answer to spring to mind is something along the lines of “as soon as possible”, because the longer we have for saving the more we are likely to save, right? However, at this juncture it is important to point out the difference between retirement saving and retirement planning.
Retirement Saving or Planning?
Retirement saving is what you need to do as soon as you can. This is the process of putting away some money that will fund your retirement years. You can do this as soon as you have enough available cash to do so.
In practical terms, most people take a few years of working and earning a salary before they can seriously think about saving for their retirement. Even the most sensible and forward thinking person probably has other things to spend their few years of earnings on before they do this. If your employer has a scheme and you stick with them for a while then this will get you started without doing much.
Of course, it also only makes sense to save your own money when are financially able to do so. For example, if you have a big student loan to pay off and other commitments then you could make your situation worse by trying to save rather than just stay afloat for the time being.
We can say that you should start saving for your retirement as soon as you can realistically do so but where does that leave the planning aspect?
In this case, we can say that the retirement planning issue is about working out the kind of lifestyle you want, where you want to live when you retire and at what age you want to stop working. These are all things that you won’t have the answer to until you are least in you mid to late 30s, I would think.
By this time, you should have a better idea of how you see your future. You won’t have everything completely clear and your plans could still change but you should start to know yourself and your dreams by this stage. This means that you can seriously think about retirement planning.
Ideally, by the time you reach this sort of age you will have saved up a decent amount of money already. Since your earlier years are about saving more than planning it seems to make sense to choose a more flexible way of saving at first. This would mean that when you get to the age at which you start planning you have the flexibility of working out what type of retirement plan or investment to choose, based on your ideas at this time. You are sure to have a clearer idea by then than you had at 20.
There are many different types of retirement plans that you can pick from. Given the importance and relative complexity of the matter it isn’t something to be taken lightly. Many plans are tax –efficient while some are riskier than others. Tax rules also change from time to time. So there is no substitute for getting up to date information at the time you make your decisions.
If you get this right then you can expect the sort of golden retirement years you dream of.
Have you already started retirement planning or saving?