In our 20s and 30s, retirement feels like a million years away. In fact, the 9-to-5 grind sometimes makes us feel like that period of rest and relaxation might never come. Our thought process is simple: hypothetically, I’m 25, I have been working for approximately 4 years, and I have 40 more years to go. When you put it that way, it feels like we have our whole life before we even get to consider retirement, but that doesn’t mean we shouldn’t be planning for retirement from now.
You might think it’s way too early to even be thinking about planning for retirement. It’s decades away, so what could you really do that’ll help you in 40 years? Turns out, a lot.
While you may be young and spritely (albeit a little tired in the office, let’s be honest), the difficult part really happens when you’re too tired to work, but too poor to quit. In other words, when you’re just about ready for retirement. This is why planning for retirement, even from now, is so important – so that you’re able to enjoy the luxury of retirement in your old age without having to worry about finances.
The basis is simple: the younger you start, the better off you are in the long run because the miracle of compound interest and the time value of money tend to work in your favour.
This is why most people choose to invest in an annuity, which simply put, just means putting aside a certain amount of money every month while you’re working (salaried employees, this is definitely easiest for you!), in order to get a stream of income every month for the rest of your life, even long after you stop working. Sounds expensive? It can be the older you get, but the earlier the start, the more affordable it is and the more profitable it is for you in the long run.
Let’s put it this way: for $300, you can see a few movies, or buy a shirt or two, or you could buy a pair of carnival boots – but with an annuity, all it takes is as little as $300 a month to contribute to your future financial success.
Let’s crunch the numbers: if you start at 20 years old, putting aside $300/month at a standard 3% rate, you’d have spent a total of $162,000 over the years. Because annuities are tax-deductible, you’d receive $40,500 in tax returns over the years, and so for only $121,500, you’re guaranteeing that upon retirement at age 65, you have access to $339,191 – that’s $2,540.54 a month, just for planning ahead.
If you were to start the same savings plan at 50, you’d spend $54,000 – or $40,500 after-tax returns – for a total of $68,039 and only $509.61 a month. Of course, you can contribute more than $300 a month, and that’ll increase your overall savings, but you have to pay an annuity for at least ten years before you can access the funds: so starting early is the key for success.*
So with the question ‘how early is too early to start planning for retirement?’ up in the air, Maritime strongly believes you’re never too early. In fact, our retirement plans run from 18 to 60. Our plans offer competitive rates; absolutely no fees – so 100% of the money you put into the fund goes directly into your retirement account; principle guarantee, so every cent you put into the fund is guaranteed to be returned to you upon retirement and even a locked-in fund, where your principle investment is safe, even including the interest compounded year to year.
It’s easy to think that there’s not much that we can do now to prepare us for the rest of our life, but Maritime’s retirement plans definitely prove that’s not the case. A few hundred dollars month to month – or in more relatable terms, one skipped cooler fete per month – now can make a massive difference in your quality of life when the time comes for you to enjoy your retirement.
*The actual tax break is dependent on other deductions being claimed for and is subject to income tax legislation.