Luke Jensen May 2, 2024 - 7 min read

When should I start planning for retirement?

“When should I start planning for retirement?” – I’m often asked this question, both through my practice and in more social environments. It’s a really good question – and the answer probably won’t surprise the majority of people.

In short, it’s never too early to start planning for one of the largest financial and lifestyle changes you’re likely to experience.

The longer you have to prepare, the better the chance of a positive result

An analogy I like to use is planning to run a marathon (a total distance of 42.2km). Would you want to wait until the week before the race to start training? Probably not, especially if you want to succeed (ask me, I tried it for a triathlon and it wasn’t pretty!). Training for a marathon takes months of dedicated training in order to get your body right for the big event. You need to train on the days you’re feeling great and ready to train, and you also have to train on the days when you’d prefer to hit the snooze button and stay in bed. There are sacrifices to be made, but you have a clear vision of what success looks like and with time and discipline, you’re giving yourself the best chance of achieving it.

More time means smaller sacrifices along the way

The same can be said for planning for retirement. Given that it will (hopefully) last for well over 20 years, you’ll want it to be everything you desire. So it’s important that we prepare, and be willing to put in the hard work to give ourselves the best chance of success and enjoyment in our later years. But here’s the big thing – the longer we give ourselves to work towards achieving our retirement goals, typically the less sacrifice we need to make along the way. If we use the marathon analogy, the more time we have to prepare, the less need there is to give up every sleep-in to squeeze in the training. The training effort doesn’t feel quite so hard when you can afford to take a couple of rest days each week.

A lesson I (try to) teach my children is that it’s easier to save $1 per week for 1 year, than it is to save $52 in one week. Spreading out the commitment over a longer duration makes the sacrifice a lot less. The same can be said for planning your retirement.

And starting early doesn’t mean you stop enjoying the present

A retirement plan is fluid and should be reviewed frequently. If we start planning 20 years out from retirement, there’s a fair chance our goals will evolve and change over this duration, therefore we need to have a plan in place that can evolve and change with it. This plan will also take into consideration your goals for your life now, so that you can continue to enjoy the present while you plan for the future.

Personally, I believe that the ideal age to start a conversation around retirement planning is around age 40-45. While everyone is different – and not everyone knows what their retirement goals are at such a young age – it’s the ideal time to start getting financial affairs in order and move toward developing financial behaviours that support each client’s own goals, values, and standards.

It’s never too late – but you may have less options

I recently had a new client come to me for retirement advice. They were planning to retire in 6 weeks’ time, and had not done any prior retirement planning. With such a short timeframe, they soon realised that their desired retirement goals were unachievable, and they instead had to settle for what they could afford. Or choose to continue working. After years of hard work, this is not a choice most Australians want to make, yet are so often forced to do. And for many, particularly those who work in very physical roles, continuing to work also becomes out of the question.

It may be tempting to delay retirement planning – sure, it can be overwhelming and feel so far away – but it’s something that we are getting closer to every day. And as much as we may want to defer the conversation, we’re only reducing our options and potentially making it harder to achieve the desired outcome (just like that marathon we talked about!).

If you would like to discuss your ideal retirement and what an achievable, holistic plan can look like for you, please feel free to contact us and we can have an obligation-free chat.