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Delaying retirement savings by 20 years can cost you roughly $750,000.
The Benefits of Setting Up a Retirement Fund Early
You’ve landed your first real job or just graduated and are adjusting to adult responsibilities. Unlike earlier generations who relied on pensions and Social Security, today it’s up to you to build your own retirement savings. One of the simplest ways to do that is a 401(k), a retirement plan offered by many employers that lets you save and invest money from your paycheck before taxes are taken out. Taxes are deferred until you withdraw the money.
Starting a retirement fund early makes saving easier and gives you valuable tax breaks. The sooner you begin, the more comfortable your retirement years are likely to be.
Why start now, even if you’re on a tight budget?
– Tax advantages: Contributions to many retirement plans are pre-tax, which lowers your taxable income now and lets your savings grow faster over time.
– Time: If you can, aim to contribute a portion of each paycheck—many experts suggest around 6%—even in your 20s. Time is your biggest advantage; starting early gives your savings decades to grow.
– Compound interest: The longer your money sits invested, the more you earn not only on your original contributions but on the returns those contributions generate. Starting at 25 and retiring at 65 gives you 40 years of compound growth, which adds up significantly.
– Employer matching: If your employer offers matching contributions, enroll and contribute enough to get the full match. That’s essentially free money.
– Portability: Retirement accounts are generally easy to roll over if you change jobs—into a new employer plan or a Roth IRA—so your savings can move with you.
– Added security: Social Security alone may not cover all retirement needs. Building your own fund reduces future stress and increases financial stability.
Replace future worry with greater financial security by starting to save now. When to start saving for retirement? Now.
Have you started saving for retirement? If not, what’s stopping you?
