Retirement Planning
July 11, 2022

When Should I Start Saving for Retirement?

Stewart Willis

Regardless of your age, it’s never too early to start thinking about retirement. Retirement can seem like a long way away if you are in your 20s or 30s, but as many of my clients will tell you, retirement comes about quicker than you can imagine!

You can achieve success later in life by establishing your nest egg now. People typically believe they need to have $1 million saved for retirement. Yet, due to high rates of inflation, the number continues to grow as time goes on. I’ve got advice to help you establish your nest egg.

Start Saving Now

Ask any one of my clients and they will tell you they wish they had started saving sooner. It’s a lot better to start saving a little early in life rather than a lot later in life. I’ve seen many 20-somethings get their first paycheck and go out and spend it all instead of investing in their future. I did the same thing, and it took years for my savings to catch up.

Additionally, you may have more room in your 20s and 30s to put money aside. Maybe you’re single or married with no kids and you have some extra cash that you can invest. If you can find a way to invest 10-15% of your income into a retirement account, your future self will thank you.

Take Advantage of Compounding Interest

Your best friend in the retirement savings process is compound interest which grows your money over time. And if you are skeptical about whether or not starting to save at age 22 versus age 32 will make any difference, here’s a basic overview of how compound interest makes all of the difference:

Let’s say two people put $100 away every month, earning 6% interest annually, and both continue saving until they retire at age 67. The investor who started at age 22 will end up with nearly twice as much money than someone who started at age 32.

Think About How You Save

There are several types of retirement savings accounts that can help you on your retirement journey. The most common is the employer-sponsored retirement plan through your place of work, like a 401(k) or 403(b).Many companies offer an employee match savings plan where a percentage of your paycheck will go directly into an investment account, and your employer will match a portion or all of that contribution.

In addition, I recommend investing in a Roth IRA for my clients because it gives you tax diversification. You’ll have upfront taxes at the time of investment, but you will be able to withdraw the funds tax-free at the time of retirement. If you’re in a lower tax bracket because of The Tax Cuts and Jobs Act of 2017, now may be a good time to consider utilizing a Roth IRA.

If you’re interested in learning more about the Roth IRA, you can read more in this article I wrote about the tax advantages of saving or rolling over into one of these accounts.

What if I Haven’t Saved Enough?

If you are reading this and you are past the age of “starting early,” there is no time like the present to start saving for retirement. If you're over age 50, you are eligible to make catch-up contributions to your retirement accounts in the amount of $6,500 in 2022.

You can set yourself up for success down the road if you start saving NOW. At Asset Preservation Wealth & Tax, we help each client on their retirement journey and work with them every step of the way.

Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

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