In our early twenties, husband and I lived in a studio apartment, sharing a kitchen and bathroom with nine other units. We had small salaries, large debts, and almost never took a holiday. And yet, according to regular financial advice – including Aegon's - we should have already started paying into our retirement accounts back then. When we had little to spare.

However, our pension payments were mandatory. We both have small pensions from that time in our lives. The kicker, though? We are easily paying quadruple those sums into our retirement accounts today – and we expect to pay more in future. The why is simple: as we gather more mileage, our salaries, costs, debts, and responsibilities have changed. For the better, fortunately. It's a standard life cycle, whereby when you're young, you make little money, likely work fewer hours to take care of children, and frequently have some (student) debt.

When you career hits its stride in your thirties, your paycheck should increase, perhaps significantly. Then, when make it to your mid-forties and have been lucky enough to remain healthy and employed, you’ve typically paid off debts and are ready to send your kids off to college. And if you’re even luckier, you may see your salary grow steadily until age 65.

So how does scraping by in your twenties, and putting a small amount of money away for retirement make sense?

Maybe it doesn't.

Even research from the Institute for Fiscal Studies suggests that a typical graduate with a couple of children, should do at least two thirds of saving for a pension after the age of 45. Because that's when you can hopefully actually afford it! In addition, it's worth noting that having less income when you retire, may be alright. Once you take account for the fact that most pensioners don't have to pay for a mortgage and don't have children to provide for, many have a higher disposable income than they had when they were in their thirties and forties.

Don't feel too bad that you're not saving as much as you'd like for retirement. Aim to hit your stride in your thirties and forties when you can afford to do so.

Disclaimer

Views expressed in this blog are solely those of the writer and are intended for informational purposes only. Aegon always recommends that you seek professional advice before taking important financial decisions.