Retirement rolls around faster than you think

New research shows one in three Australians think retirement is too far away to plan for. That's a big mistake. 

Take it from me, the day when you’re ready to hang up your work boots is likely to roll around far more quickly than you anticipate, and it pays to be prepared.

If you think time passes more quickly as you get older, you’re absolutely right. It turns out there’s a whole range of scientific reasons for this, but the impact on our finances can be profound especially when it comes to saving for retirement.

A study by Roy Morgan Research found, not all that surprisingly, about 70% of 20-year olds believe retirement is too far off to worry about - and they’re probably right. At that age I’d be more inclined to concentrate on building personal skills and qualifications to enjoy a rewarding career rather than focusing on retirement.

The big worry is that in the critical pre-retirement years between ages 50 and 54, almost one in five people still reckon retirement is too far away to bother making plans.

In our busy lives it’s easy to put saving for retirement on the back burner. But the fact is, time marches on for all of us. Waiting until your mid-forties or fifties to start growing your superannuation makes it a lot harder to accumulate a decent nest egg.

Conversely, the earlier you start building super savings, the more compounding returns do the heavy lifting for you.

Saving for tomorrow doesn’t have to mean giving up a lot today. Salary sacrifice – where part of your pre-tax wage is paid into super rather than receiving the money as cash in hand, is a tax-friendly way for many workers to save for retirement.

For some ideas on the different ways to grow your super, take a look at the government’s MoneySmart website. It features a handy Super Contributions Optimiser calculator with suggestions on the various ways to contribute to super based on your age and annual income.

Nevertheless, retirement planning is too important to rely solely on an online calculator. Seeking expert advice makes a lot of sense, particularly if you’ve left your run a bit late.

Your super fund can be a good starting point as plenty offer free or low cost advice. Or speak with a good financial adviser about the best way to grow your nest egg.

 

Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.

Salary sacrifice calculator

Compare the effect on take home pay and super by making personal super contributions, using either salary sacrifice or an after-tax contribution. 

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© AMP Life Limited. This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.