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When to start saving for retirement

When to start saving for retirement


How you go about planning for your retirement will depend on your circumstances. If you are wondering when to start saving for retirement, this article has some answers.

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So, when should I start?

When it comes to saving for retirement, the easiest way is to play the long game. So the earlier you start the better.

A major part of retirement saving involves investing your money so it can grow. You will need a long enough period of time so that you can benefit from the effects of compound growth on your savings.

The earlier you start, the greater the effect of compound growth on your savings, and the larger your pension pot will be when you retire.

Is there an ideal time?

If you’re thinking about when to start saving for retirement, the ideal time is now. It’s never too late to start, but you may need to modify your saving strategy depending on your age.

Starting in your 20s

Let’s face it, when you are in your 20s, retirement seems like a long way off. But that’s the point. Any money you save for retirement in your 20s will have at least 30 years to grow.

At this age, the best way to start investing is when you get your first job. Thanks to auto-enrolment, this will happen automatically. If you are on a budget, start by making the minimum contributions. You can then increase these contributions as your salary increases.

Starting in your 30s

You will probably have other more pressing financial priorities, such as getting on the housing ladder or planning a family. But at this point, you could have around 20 to 30 years before you retire. If you start saving now, you will still benefit from compound growth.

It is worth contributing more than the minimum. Towards the end of your 30s, you should start to think about tracking your investments annually.

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Starting in your 40s

It is not too late to start saving for retirement in your 40s, but you may need to modify your approach. You will have less time for your investments to grow, so you may need to do some calculations to make sure you’ll have enough time to build up the pension pot you want.

If you are not on track, you will need to consider increasing your pension contributions. For further information, check out our article on how to work out whether you can live off your investments.

Use this decade to get your personal finances under control. If you have any personal debts, it’s a good idea to pay these off before you reach your 50s.

Starting in your 50s

When you start saving for retirement in your 50s, you need to consider deferring your pension and working for longer, as well as increasing your pension contributions. This will give you some additional time for your investments to grow.

Depending on when you want to retire and your target retirement income, you might need to think about alternative sources of income in addition to your pension.

Alternatively, you could think about reducing your retirement income. This might not be as bad as it sounds. For example, you might be able to move to an area where the cost of living is lower.

Final thoughts

When thinking about retirement planning, there is always something you can do no matter your age. The main thing is that you get organised and plan ahead. For further information, check out the pension savings timeline from the Money Advice Service.

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