One Simple Decision in Your 20s Could Be Your Smartest Move

You’ve probably been told a million times that you should start a pension. 

Maybe it’s from your co worker whose life is carefully planned out through spreadsheets or a financial advisor or manager that urges you to take control of your future now. But like most things in life that do not have a pending deadline, you leave it to be dealt with later, because realistically saving for your retirement in your 20s or 30s is at the bottom of your to-do list. But what if your overly conscious colleague, or worse still a concerned parent, is right and starting a pension is actually less of a chore but more like giving your future self a financial edge. Could one simple decision in your 20s be one of the smartest moves you can make?

The numbers don’t lie when it comes to starting your pension early. According to Zurich, if you start saving at 25 you will generate an 80% greater return than starting at 35. Moreover, a 25-year-old’s pension pot grows 258% more than someone starting at 45. This is all down to compound growth which works like planting a tree; the sooner you begin, the more time it has to grow and strengthen. Additionally, pensions are ridiculously tax-efficient as any money you put into your pension will not be taxed. So, depending if you’re on the standard tax rate (20%), every €100 you save will cost you €80, or the higher tax rate (40%), €100 will only cost you €60, you are essentially giving yourself a discount on your future. 

This is a glimpse into two possible futures; one where you rake in €639,199 by retirement, and one where you end up with €178,596 because you thought you had more time. However, starting your pension fund early is not all about building financial gain, it’s about securing the foundations for peace of mind in your second life as a retiree, and ultimately having the financial freedom to enjoy your time.

Fast forward 20, 30, or even 40 years from now, would you prefer to unwind, enjoy life, and finally tick off that wish list that has been on hold, or find yourself scrambling to save, regretting not having started earlier? By starting early and consistently contributing small amounts over a longer period of  time, your savings essentially run on autopilot, allowing compound growth to do the work in the background. Knowing you’re on track for a comfortable retirement and not having to play catch-up later in life means you’re not passing financial stress on to those around you. Ultimately, it’s a win-win. 

Your pension is more than just a safety net for your retirement, it also opens doors to opportunities you may not have considered; one being the chance to purchase an investment property to generate extra income in your retirement. A well-funded pension also leaves room for pursuing passions, travelling the world, or dedicating time to a hobby you love. It also opens up the possibility of creating a lasting financial legacy for your family that helps secure their future as well as yours. At the end of the day, your pension is a tool to create the lifestyle you have always worked towards.

The point of this article is not to give you a slap on the wrist for not starting your pension sooner, it’s to encourage those who have been putting it off to become aware of the benefits of starting sooner rather than later. No matter what stage you’re at, today is the best time to take action on your retirement. Your pension isn’t just a number on a spreadsheet or the subject of an email, it’s your ticket to financial freedom, peace of mind and the life your future self deserves.

‍