Retirement is a phase of life that many dream about but few plan for. Saving money for retirement is crucial, especially in today’s economic climate. So, when might be the best time to start saving up for retirement?
Best Time To Save For Retirement
Ideally, experts suggest that everyone starts saving for retirement as soon as they possibly can. Easier said than done, right? Well, experts offer many options for young people to save money now. Putting away at least 10% of your monthly income is a great way to start saving. Simple math here: put away 10% of your $5,000 earned per month equals a savings of $500 per month. That means a total of $6,000 will be saved for the year. Not a bad start at all. Saving 10% per month, starting in your 20s will help cover for any dips in the stock market.
According to a recent survey conducted by Charles Schwab, Americans believe they should have $1.7 million saved by age 65. In order to hit that goal, you would need to save nearly $500 per month, starting at age 25. In some cases, this amount of savings is not reasonable at all. Some 25-year-olds may be struggling in the job market, raising kids, paying off students, or all of the above. If you begin saving for retirement later on, the amount per month needed to be put away will only increase.
How To Start Saving
If you couldn’t afford to start saving in your early to mid-20s, experts say the next best time to start saving is right now. Put away whatever you can afford, even if 10% is simply too much money at this point. Start by jumping on your employer’s 401(k) plan, if offered. Opening a traditional IRA offers more investment options than the typical 401(k) plan. The only constricting part about IRA’s is the $6,000 contribution limit for those under the age of 50.
There are several other ways to begin saving for retirement. If you can’t invest in a 401(k) plan or an IRA, it doesn’t mean saving money is impossible. Start by banking any unexpected or extra cash. This means taking birthday checks and bonuses straight to the bank. Avoid any luxury purchases when possible. You’d also be surprised by how much spare change you’ll come across over the years. Try to put all your spare change away in the bank. Picking up a part-time job or just earning some extra money on the side could prove beneficial in the future.
Age When Americans Begin Saving
Here is a look at the typical age groups when Americans begin saving for retirement. All data is from a report published by Morning Consult.
- Ages 20-29: 39%
- Ages 30-39: 25%
- Ages 40-49: 15%
- Ages 50-59: 6%
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