Retirement Planning Basics: Start Early, Save Consistently

Retirement planning can feel overwhelming, but the core principles are simple: start early, save consistently, and let compound interest work for you.

The power of starting early

The most powerful tool in retirement planning is time. Thanks to compound interest, money saved early in your career can grow exponentially.

Consider two scenarios:

• Person A saves ₮200,000 per month from age 25 to 35 (10 years), then stops.
• Person B starts saving ₮200,000 per month at age 35 and continues until 65 (30 years).

Assuming a 5% annual return, Person A ends up with more money at retirement, despite saving for only 10 years versus Person B's 30 years. This is the power of compound interest and starting early.

How much should you save?

A common rule of thumb is to save 15-20% of your income for retirement. However, the exact amount depends on:

• Your current age
• Your desired retirement age
• Your expected expenses in retirement
• Your current savings
• Your expected rate of return

Use a retirement calculator to determine your specific needs. The key is to be realistic about your assumptions and adjust as your situation changes.

Where to save

In Mongolia, retirement savings options include:

1. Social Security contributions: Mandatory contributions that provide a basic pension
2. Private pension funds: Voluntary contributions with tax benefits
3. Personal savings and investments: Stocks, bonds, and other investment vehicles

Diversification is key. Don't put all your retirement savings in one place.

Common mistakes to avoid

1. Waiting too long to start: Every year you delay reduces your final retirement balance significantly.
2. Not accounting for inflation: ₮10,000,000 today won't have the same purchasing power in 30 years.
3. Being too conservative: While safety is important, being too conservative can mean missing out on growth.
4. Not reviewing your plan: Life changes, and so should your retirement plan. Review it annually.

Getting started

The best time to start retirement planning was yesterday. The second best time is today. Even small amounts add up over time, and the earlier you start, the easier it becomes.

Use the savings calculator on this site to see how different contribution amounts and timelines affect your retirement balance. Then, take action—even if it's just a small amount to start.