Are you one of the 21% of Americans who do not have any retirement savings? Or maybe you are the one in three who has less than $5,000 saved for retirement?
When it comes to saving for retirement, people tend to avoid the subject. It is easy to think that retirement is so far away that you have plenty of time.
There is an ideal time to start saving, though. Do you know when it is? The simple answer is: as soon as possible.
Ideally, you should start putting money away for retirement in your 20s. The sooner you put money away, the more time it has to grow into a nice sized nest egg.
An Example of Starting Early
Let’s look at an example of someone saving for retirement to see how your money can grow over time. Let’s assume that you are 25 and you put $3,000 away each year for ten years.
You put that money into a tax-deferred retirement account. At the end of the ten years, you stop saving altogether. That $30,000 you put away will grow to more than $338,000 by the time you are 65 with an annual rate of return of 7%.
You Start Saving Later
What if you start saving later than your 20s? Let’s assume that you put off saving for retirement until you are 35. You then put $3,000 into your retirement fund for the next 30 years.
You will contribute $90,000 of your own money into your retirement account. That money will only grow to $303,000. This is assuming the same 7% return.
As you can see, you see significantly better results when you save early on than if you procrastinate.
Plan Your Spending Wisely
You may be tempted to halt your retirement savings so that you can spend the money on something now. This is a mistake as it will be harder for you to give up that money and start putting it back in retirement again.
If you are looking to make a large purchase, you could consider a payday loan instead. You can read more about payday loans and find out if one is right for you.
Easy Ways to Start Saving
One of the best ways to start saving is to put your retirement savings on autopilot. Many employers offer a 401(k) program.
Sign up for it and have the money automatically taken out of your paycheck each week. Doing it this way, you will never miss the money because you won’t see it.
It will also let you max out your employer’s matching offer. Your employer will then double your savings by matching your contribution. This is like claiming free money.
Start Saving for Retirement
No matter what age you are, it is essential that you start saving for retirement today. If you start in your 20s, you can get away with putting away less because it has more time to grow.
However, as you get older, you need to put away more. The closer you get to retirement age, the less time your savings has to multiply and grow.
Check out the investing wisely section of our blog to grow your retirement savings.