When you’re in your 20s, 30s, or even 40s, retirement seems like a lifetime away and an account you don’t have to fund just yet. However, it’s never too early to start planning! In fact, the best time to start saving for retirement is the day you get your first paycheck. The financial advisors at Maggi Financial offer tips on how and when to save for retirement.
When Most People Start Planning for Retirement
Studies show that a significant amount of U.S. adults delay retirement planning until a decade or more into their working career – far later than what we would advise. A recent report from Morning Consult shows when American adults start saving for retirement:
- 39% in their 20s
- 26% in their 30s
- 15% in their 40s
- 6% in their 50s
Shockingly, half of the adults between 18 and 34 are not saving for retirement at all, compared to 42% of adults aged 35 to 44, and 40% aged 45 to 64. Not starting early can seriously complicate your ability to build up an adequate retirement account which is ideally $1.7 million by age 65.
Interested in starting a retirement account? Contact the Maggi Financial Hillsborough location at (813) 909-0022 or our Pinellas/Pasco location at (727) 799-1701.
When You Should Start Saving for Retirement
At Maggi Financial, we advise our clients to start saving and investing for retirement as soon as possible! Ideally, you should put away at least 10% of your income each month. This way, your retirement funds have time to recover from any dips in the market and can benefit from compound interest (money earned from returns on investments). This allows your money to grow at a faster rate than it would with a simple interest earnings account.
According to a CNBC report, you can reach the $1.7 million mark by age 65 if you start saving $500 per month starting at 25 years old (assuming an 8% rate of return). If you wait a few years and start saving at 30, you should contribute $740 per month to reach the same goal with an 8% rate of return. Starting early eases the savings burden significantly.
If you are unable to invest hundreds of dollars per month, you should invest as much as you can – even if it’s just $10 or $20 per month! By gradually increasing your contributions, you can still build a healthy retirement account.
How to Start Saving for Retirement
While it is ideal to start saving for retirement early, the next best time to invest for retirement is NOW! The first step is to look at your budget, see where you can cut costs, and set up an auto-contribution of what you can afford to set aside.
In the interest of receiving tax benefits, the smartest place to start investing is through an employer-offered 401(k) plan. If you are unable to meet the current contribution limit, contribute at least up to the employer match. For example, if there is a 3% match, save at least 3%. Otherwise, you are leaving a lot of free money on the table.
Another option is opening a traditional IRA or Roth IRA, both of which offer tax benefits and have more investment options than an employer-sponsored retirement plan. At Maggi Financial, we will advise you on the contribution limits and age requirements to set up these accounts.
Once you have a retirement account in place and if you are financially able to do so, set up automated contributions from each paycheck, as well as auto-escalations each year.
Maggi Financial Group – Financial Planning Experts!
The complex nature of financial planning requires a careful decision-making process, and Maggi Financial can help! If you are interested in setting up a FREE consultation to discuss starting a retirement account, please contact our Hillsborough location at (813) 909-0022 or our Pinellas/Pasco location at (727) 799-1701.
