Tom and Megan, both in their early 40s aren’t sure when they want to retire exactly but they're certain it will be well before they reach pension age. They enjoy working now but want to have an active retirement whilst they're still fit and healthy enough to do all the things they want to. They’ve watched their parents have to work a few more years than planned when superannuation laws changed and so they understand how important it is to be in control of their own situation. Tom and Megan worked with us and determined that they would need roughly $1 million of investments to stop work at age 60 and then access their superannuation from age 70 (just in case the rules change on them).

With time up their sleeve, Tom and Megan are able to make smaller contributions now and take advantage of the earnings growth on their investment to help them get to their magic number. We also recommend a balanced investment for them earning on average 7% per year to which they invest $2,000 per month and plan to keep this going until they reach 60. Were they to wait until 50 before getting started their monthly investment would have ballooned to nearly $6,000 to get their $1 million at age 60.

Over the course of their journey Tom and Megan contribute about $470,000 to their fund and with the benefit of long term compounding interest their investment growth makes up the other $530,000 of their pre-retirement pool. Again, had they waiting till 50 they would have had to put in much more of their own money, in this case $700,000 and with the shorter time frame they only earn $300,000 on their investment.

Many people don’t start investing until later in life but the earlier you do start the less of your own hard earned money is needed to get your own magic number. You may not want to retire early like Tom and Megan, you may not even have a big goal down the track but one thing is certain and that’s the sooner you get started the easier achieving that goal becomes.

The case study represents the monthly savings necessary should an investor earn 7% per annum from a hypothetical asset. No adjustment has been made to account for inflation, fees, transaction costs, or taxes.