Have you started saving for retirement yet? If you answered yes, that’s awesome, you’re on your way to a bright financial future. If the answer is no, that’s okay. But it’s not something that you want to put off for too much longer. It may seem like that part of your life is a long way off and not something that you have to worry about today, but the reality is that there’s no time like the present to start saving for your future.
Longer time to save
The earlier you start saving for retirement, the better. This probably isn’t the first and definitely not the last time you’re going to hear this, and that’s because it really is that important. The sooner you start saving, the more time your money has to grow, it’s that simple. With each contribution, you are paying your future self and ultimately making your retirement that much better.
The earlier you start, the more money you will have when you retire. Not just because you are contributing for a longer period of time, although that’s very true, but because of compounding interest. Compounding interest allows your money to grow at a faster rate by adding accrued interest to the principal balance and ultimately growing quicker over time.
Here’s an example of the impact that starting early can have on your retirement account. According to CNN Money, “you start at age 25, and put aside $3,000 a year in a tax-deferred retirement account for 10 years - and then you stop saving - completely. By the time you reach 65, your $30,000 investment will have grown to more than $338,000, (assuming a 7% annual return), even though you didn't contribute a dime beyond age 35. Now let's say you put off saving until you turn 35, and then save $3,000 a year for 30 years. By the time you reach 65, you will have set aside $90,000 of your own money, but it will grow to only about $303,000, assuming the same 7% annual return. That's a huge difference.”
Create a saving mindset
Saving early and consistently helps to make saving money a habit. If possible, contribute to your retirement account from your very first paycheck by designating a set dollar amount or percentage to go towards retirement. According to CNN Money, “many financial planners recommend that you save 10% to 15% of your income for retirement, starting in your 20s”. You will never regret saving too early, but if you wait, you may be stuck playing catch-up during your golden years.