31 Oct Why Retirement Planning Starts the Day You Start Working

Why Retirement Planning Starts the Day You Start Working

For many people, retirement can feel like a distant milestone — something to think about “later.” But the truth is, the best time to start planning for retirement is the moment you earn your first paycheck. The earlier you begin, the more powerful the effects of compounding, disciplined investing, and long-term strategy become.

The Changing Nature of Retirement

Australians are living longer and working longer. The average retirement age today is around 65 for men and 64 for women, but many are choosing or needing to work part-time into their late 60s and beyond. At the same time, life expectancy continues to increase — a 65-year-old today can expect to live well into their mid-80s, meaning your retirement savings may need to last 20 years or more.

According to the ASFA Retirement Standard, a comfortable retirement for a couple currently costs around $72,000 per year, while a modest lifestyle costs about $48,000. For singles, those figures are approximately $51,000 and $34,000 respectively (as of 2025). That means a retiree could easily need $1 million or more in savings to fund a comfortable lifestyle over two decades.

Why Starting Early Matters

When you start investing early — even small amounts — your money has decades to grow. Thanks to compound returns, your investment earnings themselves begin earning returns. For example:

• Investing $200 per month from age 25 could grow to over $300,000 by age 65 (assuming a 6% annual return).
• Waiting until age 45 to start? You’d end up with around $93,000 — less than one-third as much — even though you saved for 20 years.

Time in the market, not timing the market, is what really matters.

Choosing the Right Investment Strategy

Your investment strategy should match your time horizon, risk tolerance, and goals. Generally speaking, superannuation funds and retirement portfolios are categorised as:

• High Growth – Around 85–100% invested in growth assets (shares and property). Designed for investors with long time horizons and higher risk tolerance.
• Growth – Around 70–85% in growth assets. Aiming for solid long-term returns with some volatility.
• Balanced – Around 50–70% in growth assets. Designed for moderate risk tolerance and shorter time horizons.

When you’re young, you have decades to recover from short-term market fluctuations. That means you can afford to take on more risk (for example, a growth or high-growth portfolio) to target higher long-term returns.

As you approach retirement, however, it’s wise to gradually reduce risk — shifting to a more balanced or conservative allocation. This helps protect your savings against:

• Sequencing risk – The danger that a market downturn early in retirement erodes your capital when you start drawing income.
• Drawdown risk – Spending too quickly and depleting your savings too soon.
• Longevity risk – Outliving your retirement savings.

A well-structured retirement strategy aims to balance growth and stability throughout life.

The Bottom Line

The earlier you start planning, the more options you’ll have later in life. Whether it’s through salary sacrifice into super, investing outside of super, or simply understanding how your money is working for you — starting early is one of the most powerful financial decisions you can make.

Even small, consistent contributions made in your 20s and 30s can dramatically improve your comfort and security in your 60s and beyond.

Final thoughts:
Everyone’s circumstances are different, so it’s important to get personalised financial advice to ensure your strategy aligns with your goals and risk profile. The best time to start thinking about retirement is not when you’re about to retire — it’s right now.

Important information and disclaimer

The information provided in this document is general information only and does not constitute personal advice. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser. From time to time we may send you informative updates and details of the range of services we can provide.

FinPeak Advisers ABN 20 412 206 738 is a Corporate Authorised Representative No. 1249766 of Spark Advisers Australia Pty Ltd ABN 34 122 486 935 AFSL No. 458254 (a subsidiary of Spark FG ABN 15 621 553 786)