There is no magic number to start planning but the simple answer is, the earlier you start, the more chance you have to achieve the retirement that you dream of having.

The reason for this is because of the compounding interest effect. Below are some simple graphs showing how powerful this effect can be.

The first graph shows a beginning balance of $25,000 and rate of return of 6%, with no extra payments. Starting at age 25, by age 65 the balance has grown to over $257,000. If you delay the start by 10 years, the end balance is $143,500.

If you wanted to have $1 million at retirement age 65, the graph below shows how much you would have to save every month, using a 6% return, at different starting ages.

The table shows the amount that would have been personally contributed over the time to retirement and the compounded interest amount.


So what can you do to help achieve your retirement goals?

One of the easiest and tax-effective ways is through your superannuation. There is already a requirement for your employer to contribute 9.5% into super for you but you can add extra funds by either a non-concessional contribution (after-tax money) or by a concessional contribution (pre-tax money), salary sacrificing.
There are limits, caps and rules that apply to both contributions, so it is important to know these limits to ensure you don’t go over them as penalties apply to the amounts over these caps.

For concessional contributions, the cap is $25,000 per year and this includes the 9.5% from your employer contributions. Non-concessional contributions are capped at $100,000 per year. You may not have the capacity to contribute up to the maximum but every dollar helps. The important thing is not to leave retirement planning until you’re about to retire, the earlier the better.

Please visit the Australian Tax Office website for more information on the caps and rules. For more information, tools and calculators to assist in your planning, please visit ASIC’s MoneySmart website. If you require professional help, our team is capable and more than willing to provide bespoke advice for your situation.