We’ve all heard the sayings “30 is the new 20; 40 is the new 30; orange is the new black” . While things certainly change over time in terms of our lifestyle (and fashion) choices, the way we approach retirement planning probably shouldn’t.
A new study from Roy Morgan Research shows how taking superannuation to heart in your early 30s might be the best decision you may ever make – and don’t worry, it’s not a difficult step to take!
It’s never too late (or too early) to start looking into securing your financial future.
The Roy Morgan study shows that 39.8 per cent of Australians in their early 30s (30-34 years of age) consider superannuation a little “too far away to plan for”. By the time they reach the latter end of their 30s, only 31.4 per cent of us still think that way.
As you’d expect, the figures begin to tumble from there. Considering “30 is the new 20”, and very few 20 year olds have one eye on retirement, a more forward-thinking mentality is likely to pay off.
When we take into account that major life events can happen around this time, such as bringing a new addition to your family into the world, it makes sense to plan sooner rather than later. What’s more, those in their early 30s might be in the best position to begin.
The first reason for saving earlier is due to how your savings stack up through compound interest. When you deposit money into a savings plan at, say, 30 years of age, you have another 35 years until you reach retirement age.
Starting with $2,000, if you add only $2,000 to that account each year at a 2 per cent compound interest rate, you’ll have almost $106,000 by the time you reach 65*. This is because you begin to pile up money early, and get a better interest on it over time.
Under the same conditions, if you started saving at 40 years of age, you’d have just over $68,000 when it comes to retire. We bet you can think of countless ways to spend that extra $38,000!
The second reason why saving in your early 30s is a great idea is due to time commitments. The researchers at Roy Morgan posed the statement “I know I should do something about planning my financial future but other things always get in the way” to a number of age groups to see how many would agree.
Between the ages of 22 and 49, it is those in their early 30s who found their life commitments less stifling. The tasks of establishing themselves on the job market and finding the deposit for a first home likely caused 25-29 year olds to be the most distracted when it comes to retirement planing.
By the time they reached 30-34 years of age, however, more people found the time to plan – though by their late 30s and 40s, life began to get in the way again.
With a little bit of forethought today, your 70s could indeed become your new 20s!
So, now could very well be the best time to start making your golden years the comfortable and relaxed occasion they should be. With a little bit of forethought today, your 70s could indeed become your new 20s!
That being said, don’t fret if you’ve left it a little late; people of any age can start boosting their retirement savings – it just takes a little planning and strategy.
If you’re unsure how much you can save for retirement, our superannuation tools can help. Just fill in a few details and you’ll have a basic idea of how much you should save to reach your goal.
*Based on an annual deposit frequency when additions are made at the start of each compounding period.
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