By Gary Marsh
Imagine.
It’s dark. The alarm bleats and stops at your touch.
You take a final moment, contemplating the day ahead: the morning rush, dropping the kids, the commute, work, work, work, life, life, and then do it all over again.
You shouldn’t, but you do look at the emails on your phone. Hmm? There’s an interesting one from a trusted source saying you’re going to receive a big lump sum payment. Big enough to pay off the mortgage and invest the rest so you don’t ever need to work again – if you don’t want to.
But there’s a caveat. You won’t receive it for a year and in that time, you must cut back on your spending to save a little bit, reducing subscriptions, coffee, discretionary spending, etc. Not a big issue for such a reward.
You’re excited about your newfound freedom, unhindered by the need to work for an income – allowing you to travel when you wish, engage in your true interests and hobbies, spend more time with the family, working much less or not at all. An exciting year ahead, but only a year in which to prepare and plan your new freedom. Are you ready?
Imagine the same but…
Your email says 10 years. Make the same savings for 10 years and you have a life of freedom. Still a very appealing perspective.
Imagine Reality.
Imagine the same, but your email says 20 years. Now I’m not talking fantasy. This is reality. A very real opportunity for freedom to do whatever you want – travel, hobbies, family time, work less or not at all. It’s called “a modern Retirement”.
Retirement is seen by too many as something too far away. Another lifetime. Something to be feared perhaps. Something you don’t want to think about because it seems unattainable. But I’ve taken you through this “imagining” exercise to demonstrate that it’s more of an opportunity to truly enjoy this life. Sure, your travel at retirement might be more tour bus than bungy jumping, but even so, freedom from the daily grind is an incredibly attractive proposition.
Plan Before You Think You Need To.
But there is another point to note in this imagining – the subtle and silent value of time. If you have enough of it, it’s a much easier path to freedom. A dollar invested 20 years before retirement has far more value at retirement than a dollar invested 10 years before retirement, and considerably more than one year before. This is the value of compounding, which takes time.
Market growth over time is going to increase the value of your investment and the more time you have, the more beneficial the outcome. To put some simple numbers to this: a Balanced portfolio earning an average of say 6.2% pa will be worth approx. 3.3 times more after 20 years, and 1.8 times after 10 years, and even more if some small savings are added along the way.
Talk to anyone recently retired and they’ll tell you 20 years rolls around quicker than you expect.
The big difference between the one-year imagining and retirement reality is that for most people the first one isn’t going to happen but for most people the second is. The question is: are you going to plan and prepare for the opportunity to enjoy your freedom, or leave it to chance?
You know, making a retirement plan is surprisingly empowering for most people. It’s an opportunity to indulge in some “what-if” musing and see what that might give you at retirement. There’s some reassurance in knowing a path, with some life-decision guidelines along the way. The truth is we will all need to stop working at some point.
If there is one final piece of advice I can offer, it’s to make the decision to talk to a financial advisor well before you think you need it. This will always be a better choice than waiting until the end.
P.S. If you’re already in retirement then chances are you know someone younger in your life who needs to read this. Why not forward it to them now?
Disclaimer
People & Partners Wealth Management Pty Ltd ABN 67 127 250 613 is a corporate authorised representative of Fortnum Private Wealth Ltd ABN 54 139 889 535, holder of Australian Financial Services Licence (AFSL) No. 357 306. The content of this article is for general informational purposes only and does not constitute personal financial advice. It does not take into account your individual objectives, financial situation, or needs. Any advice we provide will be detailed in a formal advice document. The opinions expressed in this article are those of the authors at the time of writing and should not be taken as a recommendation to act. To the extent permitted by law, Fortnum Private Wealth Ltd and its associates accept no liability for any loss or damage incurred as a result of reliance on this communication.
