Is there a magic age before which it’s too early to start saving for retirement? Could there be an age after which it’s not even worth bothering? What’s the ideal age to start?

These questions tend to occur to us more the older we get. Often, we only start paying serious attention to retirement when we’re past the half-way point in our working lives. Suddenly the prospect starts to seem more real.

Confronting Mortality

It’s human nature for young people to view growing old as something exceedingly far off. Many millennials are aware that the state retirement age is gradually getting later and later. As a result, many assume that retirement is not even worth thinking about. It can also be uncomfortable to contemplate a time when we’re no longer young. Many think that the only kind of retirement worth enjoying is an early retirement. Saving for a distant retirement seems a waste of money.

As we grow older though, we can more easily imagine ourselves at retirement age. So the prospect of retirement becomes less scary and more real.

Logic Versus Emotion


Our emotional aversion to the thought of reaching retirement age can make us less rational. Perhaps the most important retirement planning step that you can take is to overcome that aversion. Doing so opens up a new way of thinking about life. Instead of feeling that you have to cram all of life’s enjoyment into your youth, you begin to see life as a continuing journey. You can then start applying more logical principles to planning your future finances.

Establishing Your Lifestyle

There’s no hard and fast rule for everybody. The younger you are, the more major lifestyle changes other than retirement you’re likely to have ahead of you. Here are some examples:

  • Leaving home
  • Building a career
  • Having children
  • Buying a home
  • Buying a nice car

During the early stages of your working life, it’s perfectly reasonable to prioritise these goals. At this stage you should be thinking of establishing your standard of living, rather than maintaining it. That’s not to say that you should completely ignore retirement. It’s always worthwhile ensuring that your employer makes the maximum possible pension contributions on your behalf. This is free money, even if you need to make matching contributions.

Also, it’s important not to over-borrow in an attempt to achieve an unsustainable standard of living. If your income is interrupted, you may be unable to keep up with interest payments. Also, increases in interest rates may cause you problems. This is particularly important these days, when interest rates are at historic lows. There’s only one possible direction that interest rates can move in the future, and that’s up.

Achieving Your Lifestyle

Sadly, not everyone will have the means to achieve the lifestyle they really want. As I mentioned, over-borrowing will likely lead to big problems later. It’s important for you to know your own baseline standard of living. By this I mean the basic necessities of life, including paying for things like you home, car, children, day-to-day living expenses, and insurance. The question then becomes, how much more can you afford to spend on luxuries?

If you’re a natural saver, you’ll probably use much of your disposable income to pay down your debts and save for retirement. If you’re not so good at saving, you might end up spending all of your disposable income on luxuries.

It’s at this stage in your life, when you have significant disposable income, that you should start seriously saving for retirement. If you don’t think you’ll ever have enough disposable income, you should seriously think of making cutbacks to your current expenses.

How Much Saving?


Rather than fix an arbitrary level of savings (for example 10% of your income), it’s far better to find your most sustainable level of spending. By sustainable, I mean that you can safely continue year after year, adjusting the level each year by inflation. By definition, anything you don’t spend, you save. This is the philosophy at the heart of our Intelligent Financial Planning Calculator. Uniquely among financial calculators, it can help you find your sustainable level of spending, based on your own unique circumstances.

When should you start saving for retirement?

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