Research Shows Waiting Just 5 Years to Plan Could Cost You £100,000 in Retirement Saving

In planning for retirement, each year matters.

Recent data from Standard Life shows that waiting just five years to start your planning could mean losing out on £50,000 or even £100,000 in savings. Even a slight delay can have a big impact on your retirement funds.

The earlier you start saving, the more you benefit from compound interest. This isn’t just about numbers; it’s about securing your financial stability for the future. If you’ve been putting off retirement planning, now is the time to act.

The cost of waiting may seem unclear, but it can greatly affect your future lifestyle. By taking action today, you can help ensure a more enjoyable, stress-free retirement later.

Let’s get started.

The Compound Effect of Delay

Many people believe that five years is not important for saving for retirement. However, time plays a big role in investing. The longer your money can grow, the more you benefit from compound interest. For example, if you invest £500 every month from age 25-35, you will see much greater growth than if you start at age 30.

Waiting for just five years, even with a small return on investment, can cost you around £100,000 by the time you retire. This loss happens because of the growth you miss out on if you start saving later.

According to the FCA’s Financial Lives 2024 survey, one-third (33%) of UK adults with a defined contribution pension possess savings under £10,000.

Employees in the UK should try to save £250 a month starting at age 25 to build a good retirement fund. Delaying retirement planning means you lose out on compound interest and will need to save much more later to catch up.

Common Reasons for Delay in Retirement Planning

Here are some common reasons for delay in retirement planning:

• Procrastination: Many people put off planning for retirement because they think they can start later.
• Overwhelm: Finances can be complicated, which often stops people from taking action.
• Feeling Like There’s Plenty of Time: This is important for younger people who view retirement as a distant concern.
• Lack of Awareness of the Consequences: Many people fail to understand that delaying planning can lead to big long-term costs.

The Tangible Costs of Waiting

Delaying your retirement planning can have serious consequences. Imagine you’re 40 and realise you don’t have enough savings. If you want to retire at 65 with £1 million for a comfortable life, waiting for five more years to start saving can make it harder to reach that goal. The sooner you start saving, the easier it will be to achieve your goals.

Consider this case study from Phoenix Life:

James plans to withdraw his pension savings later than he initially thought. He enjoys his work and wants to wait until he is 70 to use his savings.

Delaying access to his pension may cause him to miss out on growth opportunities. If he keeps his investments low-risk for a long period, this delay could limit his retirement funds. He might also lose out on potential gains from riskier assets.

If James waits five more years to access his savings, he could miss out on major growth (up to £ 50,000 or £100,000) because he would lose compounding returns.

Expert Advice on Planning Early

“The earlier you start, the more you can harness the power of compound growth, and the less pressure there is to save large amounts later in life. Delaying even a few years can significantly reduce your final pot, making it harder to achieve the lifestyle you want in retirement.” Said Chartered Financial Planners from Partridge Muir & Warren, with over 50 years’ experience in helping clients secure their financial futures.

Planning reduces the stress of saving money later in life. It gives you more flexibility in organising your retirement savings. Starting early allows you to use a more moderate investment strategy while still achieving good growth. You will have more time to handle market changes and adjust your plan as needed.

How to Avoid Costly Mistakes

Here are some methods to about costly mistakes:

• Automate Your Savings: Set up automatic transfers to your retirement account. This way, saving becomes a routine, and you are less likely to forget it.
• Increase Contributions Over Time: When you get a raise or bonus, increase your retirement contribution.
• Consult a Financial Planner: Get expert help to create a simple retirement plan that fits your goals and finances.
• Start Small But Start Now: Even if you start with a small amount, commencing early can help your savings grow over time.

For more guidance on pensions, look at the MoneyHelper site for additional resources and learning.

Conclusion

Waiting just five years to start your retirement planning could leave you with a financial gap of £100,000 or more when you retire.

Time is one of your biggest assets, and starting to save early can greatly improve your financial security later on.

The sooner you start, the more you can benefit from compound growth.

Delaying your retirement planning will make it harder to achieve the lifestyle you want in retirement. So, why wait?