Whether you just started working or you’re nearly done, you can still potentially grow your nest egg.
Key points
- It’s never too early — or too late — to start saving for retirement
- If you are just starting out, focus on saving as much as you can now
- If you are nearing retirement, consider increasing contributions to your savings
If you are nearing retirement, consider increasing contributions to your savings.
When planning for retirement, the truth is that the earlier you start saving and investing, the better off you’ll be, thanks to the power of compound interest. And even if you began saving late or have yet to begin, it’s important to know that you are not alone, and there are steps you can take to increase your retirement savings.
“It’s never too late to get started,” says Rose Miller, head of the JN BeWi$e financial empowerment programme.
Mrs Miller further recommends that a benchmark to adopt is that persons in their 20’s should aim to save 25 percent of their overall gross salary. “That includes retirement account contributions, matching funds from your company, cash savings or money you have invested elsewhere,” she explained.
She advises that by age 30 one should have the equivalent of their annual salary saved.
“Therefore, if you earn $1 million a year, aim to have $1 million in savings when you hit 30,” she outlines.
Mrs Miller said one of the reasons many Jamaicans are often forced to work beyond the normal retirement age, or struggle during their “golden years,” is because many don’t save as much as theyx can while they’re young.
“The reality is that most Jamaicans do not establish adequate pension arrangements to ensure that they have a steady source of income when they retire,” she said.
In fact, the Financial Services Commission (FSC) found that private pension plans, as at the end of 2018, only covered some 10 per cent of the persons employed in the Jamaican labour force.
So, how much should one have saved for retirement?
Take a look at the chart below:
The Multiplier Effect:
By age 35: Have twice your annual salary saved.
By age 40: Have three times your annual salary saved.
By age 45: Have four times your annual salary saved.
By age 50: Have five times your annual salary saved.
By age 55: Have six times your annual salary saved.
By age 60: Have seven times your annual salary saved.
By age 65: Have eight times your annual salary saved.
“While this may sound intimidating today, if you were putting aside savings to work for you, starting in your 20s, it’s not as difficult as it may seem,” Mrs Miller affirmed.
*Name changed on request.
