Why You Shouldn’t Wait Until Your 50s To Think About Retirement

For most people in their 30s and 40s, life is full. At this stage of life, you’ll likely have a mortgage to manage, children to support, careers to focus on and the day-to-day cost of living to contend with. It’s not surprising then that retirement can feel like a distant, abstract problem for ‘future you’.

As a result, it’s not uncommon for some people only to engage with retirement planning in their 50s. While that’s not too late, retirement planning is more expensive and restrictive at this point than it would have been had planning started earlier.

Understandably, though, many put off starting earlier as they don’t want to sacrifice their lifestyle of today. If that’s you, don’t forget that saving towards retirement as soon as possible ultimately buys yourself options for tomorrow.

Waiting until you earn more

One of the most common reasons people delay early retirement planning is the belief that it’ll be easier and more straightforward later. There’s an assumption that income will be higher, the mortgage will be smaller and life in general is that little bit calmer.

While all these things can be, and often are, true, it does still mean that it forces you into paying higher ‘catch-up’ contributions later on. Many people underestimate how quickly the years pass and how expensive a long retirement can be.

Another reason people also put off planning for retirement is that it can feel complicated and loaded with financial jargon. But avoiding the issue altogether won’t make the need to save for retirement go away. In fact, it exacerbates the situation by compressing the problem into a shorter timeframe.

The real cost of waiting until your 50s

Waiting until your 50s to plan for retirement means you’ll be affected by the following:

1.    You lose time

Time is one of the most valuable tools to have in your toolkit when planning for retirement, thanks to the power of compounding.

Imagine two savers:

• Person A starts retirement planning in their early 30s, saving modest amounts.
• Person B starts in their early 50s, saving much more aggressively.

Even though Person B contributes more overall, Person A often ends up better off because their money has had decades to grow.

This is why retirement planning in your 40s, or even earlier, can dramatically reduce the pressure on you later on. If you start earlier, you’re not trying to play catch-up; you’re simply letting time and compound growth do all the heavy lifting.

Ask yourself: would you rather save a little now, or a lot later on?

2.    You lose flexibility and options

Another benefit of time is that early savers generally have more choices at their disposal. It means they might be able to:

• Take early retirement
• Reduce their working hours or even change career
• Pay off their mortgage sooner
• Be more resilient to unknowns such as redundancy or illness

If you don’t start retirement planning early enough, one of the only options available to you is working longer to fund your retirement.

3.    You shrink your catch-up window

When it comes to starting retirement planning in your 50s, you’ll only have about 10-15 years to really get into the nuts and bolts of how and when retirement will happen. You may start panic-saving as a result, adding stress to this time of your life.

4.    You risk underestimating the ‘gap years’

Many people forget that retirement comes in income phases. For instance, depending on what age you retire, there can be a period before you can access your pension, a period before you receive the State Pension and then your later retirement years.

Given the later and later date of the State Pension kicking in, the need for a bridging income has become longer. The Guardian recently highlighted these ‘bridging years’ as a key planning priority and they’re years often overlooked by late planners.

Have you thought about how you’d fund the years between work and pensions?

5.    You’re more exposed to market timing risk

When you start investing for retirement earlier, you’ve got more time to come back from any market downturns. If you start investing later, a market downturn can hit you right when you need growth the most. In short, early investors have time to recover, late starters often don’t.

What a good retirement plan looks like before 50

It’s important to remember that a retirement plan doesn’t have to be perfect. The important thing is simply to get started.

A good plan will include:

• A clear retirement target which will look at age range and lifestyle
• A pension strategy. I.e. where your income will come from, such as workplace pensions or personal savings
• A bridging plan to include ISAs or other investments for the time between retiring and accessing the State Pension and/or your workplace pension
• A debt strategy to tackle your mortgage and any high-interest debt
• A regular review
• A contingency or protective layer to include an emergency fund and insurance
• A Plan B for the times when life doesn’t go to plan

Remember: keep things simple, so you gain clarity, not complexity.

If you’re reading this in your 30s or 40s, consider these 7 things, if suitable for your circumstances:

Small consistent actions will all add up to make a big difference. Here are 7 things you could do to ensure your retirement plan is as strong as it can be:

1. Find out what you already have in terms of pensions, including any workplace schemes or old pensions
2. Consider increasing contributions gradually over the years, as even +1% matters
3. Avoid lifestyle inflation when your income rises. It’s so easy to do, but channelling some of your raises into your pension or savings can make such a big difference over the years.
4. Use tax-efficient saving where possible, though be sure to avoid technical loopholes
5. Pay off high-interest debt
6. Build an emergency fund so you don’t raid pensions in a crisis
7. Review your pension yearly or after major life changes

Already in your 50s? It’s not too late

A common question we hear so often is: ‘is it too late to start a pension at 50?’

Reading this article may make you wonder whether that will be the case. However, don’t despair. The answer is a definite no. It’s not too late when you are in your 50s, but you do need a very focused approach. You’ll need to prioritise realistic income needs, review your pension contributions, see where savings can be made through consolidation and get clear advice for your future.

When professional advice can help

Financial advice can be one of the most valuable things you do for your retirement. It’s particularly helpful if you:

• Have multiple pensions or a complex situation
• Are self-employed or have income variability
• Are uncertain about your retirement age
• Want to retire earlier or phase work out
• Want confidence in your financial planning numbers

If you find yourself in one of these situations, a good advisor won’t just explain your options; they’ll turn your intentions into a realistic roadmap.

That’s what good retirement planning is really about and what we are focused on at First Wealth. We can help you reduce your uncertainty today, so you can be confident about your future. Give us a call to see how we can help you plan your retirement – however old you are.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. The Financial Conduct Authority does not regulate estate planning or tax planning.

This document is marketing material for a retail audience and does not constitute advice or recommendations. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.