Retirement may seem like a lifetime away, so many people assume they can hold off on saving now and make it up later. But it is important to start saving as early as you can. Waiting too long can make it nearly impossible to catch up, and consumers who wait will end up with significantly less money when it comes time to retire, even if they save a higher percentage of their paycheck.
Ideally, consumers should start saving in their 20s, when they first leave school and start earning paychecks. By doing this, the money has a long time to grow. Each year’s gains will generate more gains, and you’ll be able to earn a lot on this compounding. For example, if you start saving $200 a month at age 20, you will have accumulated around $550,000 by the time you are 65 (assuming a 6% annual return). But a 40 year old contributing the same amount each month at the same earnings rate would only accumulate $138,600 by age 65. And even if a 40 year old contributes more per month, it will be much harder for them to earn the same amount that a 20 year old made. The end result is a huge difference, and it can be significantly impact retirees.
So, it is important to start saving as early as you can. And if you haven’t started, now is the time to start!
