Ok. When Do I Really Need To Start Saving For Retirement?

So, you haven’t started saving seriously for retirement and you’d do not like the idea when you honestly need to start save. The best and most honest answer to that question is today. No matter how old you are, the challenge to save enough for a safe, secure and comfortable retirement is such that you cannot wait that long.

You’ll need a lot of money. If you are currently under the age of the age of 45, you will likely want to accumulate more than $1 million at retirement. Even though you have 20 or more years to ensure that, it will take saving a lot of money along the way to arrive there. You can’t just save 10% of your income for the last ten years of your career and are fed up with retirement. The math simply doesn’t work. If you are shorter than 45, you may not need $1 million to have the sort of retirement you want, but you’ll need a lot more money than you think.

Use the power of compounding. A dollar contributed to your retirement savings 40 years before you retire will become almost $15 when you retire if you invest at a reasonable 7% rate of return. That’s the power of compounding returns. Thirty years out and the contribution will grow to barely more than half that much. Twenty years: $3.87. Ten years: $1.97. As you can see, the money you save early in your career has much more power than the money you save later.

Consider how much you save. If you start saving for retirement consistently 40 years before you retire, you may be able to accumulate enough for retirement by saving as little as 6% of your salary. If you wait until you have just 30 years of retirements, you’ll want to save 10%. If you are called upon to have had 20 years, you may be unable to accumulate as much by saving 20% as you could have a decade earlier with 10%. If you wait until ten years before, it will be almost impossible to rescue enough to retire in the same way you could have retired otherwise. Saving 40% of your income for the last ten years would accumulate less than contributing 6% for 40 years.

Social Security will dwindle. For folks who retired before the turn of the millennium in America, social security will be a key portion of their retirement. The benefit is taken will be indexed for inflation and they will not likely notice a sizable decline in the purchasing power of their benefits while they are alive. Those who are retiring now will likely notice that their benefits don’t buy as much in twenty years as they do now—the government is such as to change the formula used to index benefits to inflation with the result that the benefits will grow more slowly. That will impact even more theatrical people who will be retiring twenty years from now. Their retirement benefit will potentially start later and ultimately pay only 75% as much per year—adjusted for inflation—as current retirees now receive. The conclusion is, of course, that retirement savings are greater for future retirees than they were for current retirees.

No matter how mature you take or when you are expected to retire, you will be better off if you start saving for retirement today.