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Myth 7: I don’t need to start investing for my retirement yet

Date: 07 July 2023

3 minute read

I don’t need to start investing for my retirement yet

Life’s biggest events go best when we plan them well. Weddings, house moves, preparing to start a family – they all require our focused input and attention. And saving for retirement is no different.

And like those other life events, starting sooner rather than later often yields better results. The power of compounding returns (where you earn returns on your returns) is shown by the chart below, which illustrates two investors who both invest £100,000 into global equities. Investor A began in December 1996 and Investor B started five years later.

Graph comparing two investors returns on global equities

Past performance is not a guide to the future. The value of units may fall as well as rise.

Source: Quilter Investors as at 30 June 2020. Based on an initial investment of £10,000 into the MSCI World GBP return from 21/12/95 and 31/12/01.. The information provided is for illustrative purposes only and doesn't represent the past pferomance of any particular investment. It is not possible to invest directly into the MSCI World Index.

Furthermore, someone who starts saving in their 20s saves around twice as much as someone who starts 10 years later.

Make use of tax incentives on pension contributions

Any money you invest into a pension will be topped up by the taxman, with the amount being dictated by your income tax status.

This means that the longer you leave it to start saving for retirement, the longer you’re leaving free money from the government.

It’s too late for me, so what’s the point?

If you feel it’s too late to start saving for retirement, it’s worth thinking again and seeking professional advice to fully understand your options. Doing something is better than continuing to do nothing, especially given that a well-considered investment strategy can help to partly mitigate any shortfall between your retirement savings and retirement needs.

There are also other options, including delayed retirement, which could include dropping to part-time work, which may be best discussed with a financial adviser. Part-time working has become increasingly popular in the wake of Covid-19, with nearly 10 million people working in part-time or temporary jobs in mid-2022 – the highest number since the the start of the pandemic.

Explore the right solution for you

The effect of compounding returns means that it’s better to start investing for retirement sooner rather than later. A return of 5% a year allows you to double the value of an initial investment approximately every 14 years.

Even if you haven’t started investing for retirement until your 30s or 40s, there is still time to allow your money to potentially double in value or more before retirement. However, even if you are older, it will often make sense to take advantage of the potential tax incentives of saving for a pension, even for a shorter time horizon than a younger saver.

If you would like to know more about investing, download our Lessons from History guide on what we have learned from more than 240 years of investing. Alternatively, fill in a form to contact one of our investment managers.


David Henry

Investment Manager

My job is to ensure that my clients’ individual portfolios are constructed in such a way as to meet their financial objectives and distinct requirements. I make the day to day decisions regarding client holdings, and ensure that they, as well as their advisers, remain up to date and comfortable with the progress of their investments through all kinds of markets.

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The value of your investments and the income from them can fall and you may not recover what you invested.