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Transition and Retirement Basics every Employee needs to know

One of the most effective ways, an employee can learn about retirement planning, is to listen and pick lessons, from those who have already retired.

These people may have retired through any of the following ways:

  • Mandatory age
  • Restructuring
  • Closure of business
  • Contract expiry
  • Medical grounds
  • And any other causes.

Did you know?

That apart from the mandatory age, the rest of the retirement causes can occur at any time and age?

From the already retired;

  • You may be amazed by the major lessons you will be able to pick.
  • You may also be surprised by what you can learn and apply in your own situations.
  • And most importantly, the knowledge and insights that are empowering and life changing.

Therefore, you will be able to:

  • Tap into the retirement expert’s knowledge
  • Learn from the real-life experiences
  • Access retirement planning information

 Have you visualised your transition into the retirement future?

Truth be told, when this question is asked to employees who have just started their work career, these are the most common answers we get:

  • Still young to focus on retirement
  • I contribute to social security
  • There is life to enjoy first
  • Investing is a hustle
  • I don’t have enough money to start saving and investing for retirement now and so forth.

Honestly, retirement planning does not easily get into the attention of the early working years of many people.

Why?

Because, many employees see retirement to be very far in the future and therefore see no reason to invest for it early.

I am going to share with you one tip as to why you have to start to save and invest early and now.

That is, take advantage of the power of compounding.

Let me illustrate this with an example of three employees John, James and Jordan who start employment at the same date.

All saving and investing US$50 per month at an interest rate of 10% per year.

But John, starts to save and invest at age 25, while James gets interested in saving and investing at age 35, meanwhile Jordon is convinced to save and invest at age 45.

This is how their financial position will stand at age 60 summarised as follows:

TABLE SHOWING THEIR FINANCIAL POSITION AT AGE 60
John James Jordan
Start Saving Age 25 35 45
Amount Saved & Invested 50 50 50
Interest Rate Per year 10% 10% 10%
Principal Amount Saved 21,000 15,000 9,000
Compound Interest Earned 141,615 44,008 10,065
Financial Position at age 60 162,615 59,008 19,065
  • John will have accumulated savings and investments of US$ 162,615 composed of principal saving of US$ 21,000 and compound interest earned of US$ 141,615.
  • James will have accumulated savings and investments of US$ 59,008 composed of principal saving of US$ 15,000 and compound interest earned of US$ 44,008.
  • Jordan will have accumulated savings and investments of US$ 19,065 composed of principal saving of US$ 9,000 and compound interest earned of US$ 10,065. 

GRAPH SHOWING THEIR FINANCIAL POSITION AT 60 YEARS OF AGE

Now, you can greatly see the difference between John, James and Jordan at age 60. This difference is due to time and the power of compounding.

For emphasis:

If James is to accumulate what John will earn of $162,615 by age 60, starting at age 35, he has to save and invest $132.28 per month.

This is more than 2 times what John saves monthly.

And, if Jordan is to accumulate the same amount by age 60, he has to save and invest $420 per month. This is more than 8 times what John saves every month.

You can compute your own figures using the compound interest calculator for free, it’s easy and quick.

I want to encourage you to take advantage of time and the power of compounding.

You can also acquire necessary knowledge and skills to make a better retirement life.

Remember, Your Transition and Retirement Investment May Change Your Life Forever.

Charles Barugahare

Financial|Transition Coach & Advisor

You can also read;

Personal Finances: The Basics

Health, Self, Wealth, Social-Life Balance

1 thought on “Transition and Retirement Basics every Employee needs to know”

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