Many times, when I sit down with a new client, I get asked two major questions about retirement.
1. When should I start saving?
2. how do I start saving?
what I’ve come to find is that many people feel anxious about retirement because it’s a lot of money, it seems risky, and it seems unattainable. This article will go over when you should start saving, why saving for retirement is important, how much you should start saving, and how you can get started.
Retirement is when one formally decides to step away from the workforce and rely on investments, social security, and other accounts to compensate for income. So, it goes without saying that retirement savings are important so you can maintain your standard of living while you’re no longer working.
As mentioned earlier, I get asked when someone should start saving for retirement all the time. The answer – the earlier the better. I understand that this answer doesn’t necessarily prompt anyone to start saving, so I’m going to show you an example of why it’s important to start saving sooner rather than later.
assuming an average 8% return, if a 25 year old invested a one-time lump sum of $50,000 and let it sit until they're 65, they would have $1,086,226.07.
at the same 8% average return, if a 45 year old invested a one-time lump sum of $50,000 and let it sit until they're 65, they would have $233,047.86.
this just goes to show that the earlier you start saving, the better. The next question is always “How much should I start saving?”
There are many rules of thumb that you can apply, and I will post more article on that later. For now, I’m going to give you just enough to get started so you don’t bite off more than you can chew.
Save as much as you can each month - $25, $50, $100 – whatever you can save, set it aside from your discretionary income. A good goal to strive towards is 10% of your income. Start saving what you can handle and increase it as you can. Once you hit 10% of your income, increase your goal.
The last main question I get is “Where do I put this money for retirement?” If you work in a company that offers a 401k and matches your contributions – take advantage! If you don’t know what matching is, it’s when a company will match a certain percentage of your contribution up to a certain percent. In other words – that’s FREE MONEY into your retirement fund that gets compounded by interest.
If you don’t have a 401k, or if you want to save more for retirement, I suggest opening an Individual Retirement Account, or IRA.
There is a ton of information I can provide on both of these types of accounts and many others out there, but that will just have to wait for another article! If you have questions in the meantime, you’re always welcome to ask me questions by commenting below, emailing me, or direct messaging me through Instagram, Facebook, or LinkedIn. I’ve also linked two great articles below.