Retirement, when you are in your thirties and forties, can still feel like a long way off. With the rising pension age in Australia (70 in 2035) it can feel a bit like you’re never ever going to retire. However, it is never too early to start planning for your retirement. An important part of that is managing and saving money. You will, of course, be entitled to a state pension and possibly a pension from your job but it is still important to save money if you want to do costly activities like travelling when you retire. Here are some tips on how you can save for your retirement.
The earlier you start saving money during your working life, the more you will have accrued by the time you finally retire. The compound interest you gain on your savings will be considerable over a long term, so the earlier you begin the better. Additionally, if you want to retire a couple of years earlier than 70 then this stash of money will tide you over until you are entitled to your pension.
Make a budget
If you haven’t already got a budget, then you need to make one. Your budget should show all of your expenses, including utility bills, rent/mortgage, food, commuting costs, any insurances, and anything else that is costing you money. That will allow you to work out exactly how much money you have left over to put into your savings.
Make a long-term plan
It’s all well and good making a weekly and monthly budget but you also need to anticipate major expenses that will happen over the course of your working life. Things like weddings, children, children’s university expenses, new cars, a new house and so many other life events can really hammer into your finances. Any of those could wipe out your carefully built up retirement savings. If you make a long-term plan, then you can cater financially for such events by setting aside money for them. If you need any help with making a financial plan, then try reading the informative articles on Fat Cat.
Know how much you want to save
The amount you need to save will massively depend on your planned retirement lifestyle:
- 65-year-old singles (modest lifestyle): $24,270 per year ($467 per week)
- 65-year-old singles (expensive lifestyle): $43,695 per year ($840 per week)
- 65-year-old couples (modest lifestyle): $34,911 per year ($671 per week)
- 65-year-old couples (expensive lifestyle): $60,063 per year ($1,155 per week)
- 85-year-old singles (modest lifestyle): $23,878 per year ($459 per week)
- 85-year-old singles (expensive lifestyle): $39,443 per year ($759 per week)
- 85-year-old couples (modest lifestyle): $35,369 per year ($680 per week)
- 85-year-old couples (expensive lifestyle): $55,382 per year($1,065 per week)
Of course, you don’t know if you will be single or married by the time you retire but it is best to save money based on how comfortable a lifestyle you wish to have in your retirement.