The Age of Retirement
Saving for retirement may not seem like a priority in your twenties, but most financial advisors recommend it. The earlier you start putting money away, the better off you’ll be as you age.
Unfortunately, 80 percent of people ages 30 to 54 say they don’t believe they have enough money saved for retirement, according to our infographic below. With 36 percent of Americans older than 65 relying completely on Social Security, and 38 percent of Americans in general saying they don’t save anything for retirement, people don’t save enough.
It’s never too early—or too late—to start saving for retirement. The most important thing is to get started and then formulate a strategy based on your age and retirement goals.
The Benefits of Starting Young
You’ve likely heard of the benefits of compound interest—in which the interest that accrues becomes an asset that accrues interest itself. According to financial experts like Business Insider’s Sam Ro, it’s one of the major benefits of starting to save for retirement at a young age.
However, compound interest isn’t the only reason to start young. There are a number of other benefits you may experience if you start early, says David Ning, including:
- You’ll waste less money. Individuals who are committed to specific retirement savings goals budget better and spend less on frivolous things. If you hone this habit at a young age, you’re also more likely to hang out with others who do as well—perhaps even a future mate with similar habits and long-term financial goals.
- You’ll have more confidence. There’s nothing like financial vulnerability to suppress the courage to take risks and try new things. Having a financial cushion will give you the confidence to pursue your dreams in both your personal and professional life when you see the chance to go for it.
- You’ll have better quality of life. Financial stress can be the root of unhappiness in many ways—including relationship troubles, issues at work, and negative effects on your health. By learning to save early in life, you’ll have a better shot at a balanced life that isn’t constantly strained by a shortage of cash.
- If you’re in your twenties: Make the most of time, since it’s definitely on your side. If you start now, you’ll need to save a lower percentage of your paycheck to get the same or better results than if you start even a decade later.
- If you’re in your thirties: Experts recommend considering a Roth IRA to make the most of saving at a young age—with the power of tax-free growth over a 30-year time frame.
- If you’re in your forties: You might want to consider consolidating retirement plans you’ve accumulated to this point into a single plan through your employer or through an IRA rollover.
- If you’re in your fifties and beyond: It’s time to play catch-up and make the most of how the IRS allows you to do it—with additional contributions permitted to IRAs and 401K plans.
As evidenced in our infographic below, the amount of money needed for retirement is unique to each individual and depends on both the length of retirement and how much you’ll need each month. Check it out and see how you’re doing as you evaluate your own retirement goals and the strategies you’ll need to achieve them.
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