When should you start planning for retirement?

When you’re in your 30s or 40s, the thought of retirement can seem distant. You’re likely focused on advancing your career, raising your family, and just generally getting by. 

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But what if I told you that now is the most critical time to start planning for your financial future?

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If you're a working professional with a stable career, family and a combined household income of over $150,000, you’re in an excellent position to build long-term wealth. But if you want to maintain the quality of life you enjoy now into your retirement, the key is to start early. In fact, the next 15 to 20 years could be the most important window to ensure you have the wealth or investment assets to secure your future lifestyle.

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Why Early Retirement Planning is Key

Many people believe they can start thinking about retirement closer to their 50s, but the truth is, starting earlier provides a critical advantage - time!

The earlier you begin your retirement planning, the more time you give your investments to grow, thanks to the power of compound growth. Essentially, compound growth means that not only does your money earn interest or returns, but the returns on your investments start earning returns too. This snowball effect can significantly increase your wealth over time.

For example, if you begin saving and investing consistently at 35 years old, you'll have 25-30 years of growth before you reach retirement. Compare that to someone who starts at 50, and you'll notice how time becomes your greatest ally in building wealth. Starting at 50 leaves you with a far more compressed timeframe to build a nest egg big enough to sustain you for the next 20-30 years post-retirement.

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Maintaining Your Lifestyle Into Retirement

One of the most common concerns for high-income earners is how to maintain the same standard of living once they stop working. You’ve worked hard to get to where you are today, and the thought of downsizing or cutting back in retirement isn’t appealing. However, without a proper plan in place, this could be the reality for many.

The goal of your retirement planning should be to build a portfolio of investments (we call this “income-producing assets”) that will provide you with enough cash flow to maintain your current lifestyle well into your retirement years. That means covering your living expenses, healthcare costs, and, ideally, having enough left over to continue enjoying your passions, travel, or support your children’s education.

This requires careful planning—understanding how much you need to save, where to invest, and how to optimize tax efficiency along the way.

Without a carefully thought-out plan, you might find that your savings won’t stretch far enough. As life expectancies increase and the cost of living rises, especially in places like New Zealand, planning becomes essential. 

You want to ensure that you don't outlive your savings or have to drastically scale down your lifestyle during what should be your golden years.

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Why 15-20 Years is the Sweet Spot

Planning for retirement with at least 15-20 years ahead of you gives you time to strategically build wealth or investment assets. Here’s why this timeframe works best:

1. Longer Investment Horizon: The longer you stay invested in the market, the more potential there is for your wealth to grow, especially through diverse portfolios. Markets tend to have short-term volatility, but over 15-20 years, there's more time to weather downturns and come out ahead.
2. More Flexibility: With more years ahead, you can afford to take calculated risks, invest in growth assets and allow them time to mature. If you wait until you're closer to retirement, you might be forced to stick with conservative investments, limiting your potential growth.
3. Better Compounding Power: As mentioned earlier, the more time your investments have to compound, the more significant your returns can be. A longer timeline allows for exponential growth, especially in tax-efficient or retirement-focused accounts.
4. Lifestyle Considerations: Many people in their 30s and 40s are busy raising families and managing careers, but this is precisely when you need to start building the foundation for the next stage of life. By starting now, you’ll have more time to take advantage of tax-efficient strategies and investment opportunities that will give you a larger nest egg to maintain your lifestyle.

How to Approach Early Retirement Planning : What You Can Do Now

1. Get Professional Advice: Working with a personalised financial adviser can help you clarify your financial goals and develop a personalized strategy to achieve them. This is especially important if you feel overwhelmed by the complexities of investing and financial planning.
2. Set Clear Goals: Do you want to retire at 65, or would you like to retire earlier? How much income will you need to support your lifestyle in retirement? Getting specific about your future goals will help determine how much you need to invest today.
3. Diversify Your Investments: Building a diversified portfolio is key. This could include a combination of managed funds, real estate, and other income-generating assets. The goal is to reduce risk while maximizing returns over time.
4. Take Advantage of Compounding: The earlier you start, the more time compounding has to work its magic. Even small, consistent investments can grow significantly over time.
5. Monitor and Adjust Your Plan: As life changes—whether through career advancements, changes in family circumstances, or shifts in the economy—your retirement plan will need to be adjusted. Regular check-ins with your financial adviser are crucial to ensure you stay on track.

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Don’t Wait Until It’s Too Late

It’s easy to put off retirement planning, especially when you're in your 30s or 40s and juggling the demands of family life and a career. Retirement might seem far away, but by starting now, you give yourself the greatest gift of all—time. With 15 to 20 years of consistent, smart investing and planning, you can ensure that your golden years are spent enjoying the lifestyle you’ve worked so hard to build. 

The earlier you start planning for retirement, the more financially secure you will be when it’s time to retire. The goal isn’t just to retire, but to retire comfortably and maintain the same quality of life that you and your family enjoy now.

Whether you’re aiming to travel the world, spend more time with family, or continue living in comfort without financial worries, building your wealth now will provide you with the financial freedom to do just that.

Take Action Today

Start planning for your retirement now, before life becomes more expensive and time slips away. By working with a professional financial adviser, you can simplify the process and create a tailored plan that works for your unique circumstances. Begin today and give yourself the gift of peace of mind for your future.

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Not sure where to begin? Book a free, no-obligation discovery session with one of our personal financial advisers today. We’ll help you create a roadmap for your retirement so you can maintain your lifestyle and achieve the financial freedom you deserve.

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