Articles, Retirement

Reasons It’s Never Too Early To Save For Retirement

Written By: Eric Williams
Reviewed by: Mike Reyes
Last Updated October 13, 2022

This content is not intended to provide financial advice; rather, it’s for information and entertainment purposes only.

Always consult a licensed advisor for investment decisions.

Some of the links in this article may be affiliate links. If you click on a link, the affiliate may provide compensation to this site at no cost to you, regardless if you decide to purchase something. You can read our affiliate disclosure in our privacy policy.

Finally, this article has been written, reviewed, and fact-checked. Portions of this article have been written using assistive AI tools to help with tasks like research, spell-checking, grammar, and translation. Please have a look at our editorial guidelines for more information about how we create content.

a happy family with kids hoping to avoid financial mistakes

“Take advantage of every moment because it’ll be over before you know it.” This valuable advice applies to childhood, education, careers, and life. Every retiree would say the same thing to their 20-year-old self.

Every moment counts. Here are some reasons why it’s never too early to start saving for retirement.

Time Is Money

The most logical reason to start saving early is to give yourself more time. If you start saving now instead of two years later, that time difference could be worth six digits.

The age when you start contributing money to your retirement significantly impacts the final total. CNN Money’s retirement guide provides a great example of the difference a decade can make:

  • Starting at 25: Say you put aside $3,000 a year in a tax-exempt retirement account for 10 years, then stop saving money for retirement. Assuming a conservative 7% annual return, your $30,000 investment over that decade would grow to $338,000 by age 65.
  • Starting at 35: Say you save the same $3,000 a year for 30 years. You will have set aside $90,000 during that time, but it only grew to $303,000 with an identical 7% annual return. The last 10 years you neglected to save caused you to miss out on another $35,000, at least.

Do not underestimate the power of compound interest. You should start devoting money to your retirement as soon as you become a full-time workforce member. In this situation, time is money.

More Savings Before Life Gets Crazy

Your early 20’s are the calm before the storm. It might not feel that way, but you will take on more responsibility as you age. Aside from advancing your career, you might want to travel more often, buy property, or start a family. These things are expensive and time-consuming. You need at least some savings to give yourself breathing room.

It’s better to start saving while you only have a handful of expenses to pay. You’ll be able to devote more of your paycheck without causing as much financial strain. As we discussed in the first reason, time is your best resource when planning for retirement.

Company-Sponsored Retirement Plans

The easiest way to begin saving for retirement is through company-sponsored plans, namely 401(k)s and Roth individual retirement accounts (IRAs). Setting up these plans is much more straightforward when you’re new to the workforce. Talk to your employer about setting up these plans ASAP.

Roth IRAs are only available to individuals with incomes below $144,000, so everyone qualifies for one early in their careers. The money you put into an IRA doesn’t get affected by taxes. However, you might have to pay a tax if you withdraw some of your earnings within five years of creating the account.

Whether you have a 401(k), Roth IRA, or both, it’s best to leave them alone and let the money grow. The longer you cultivate your savings accounts, the better your harvest will be.

Keep Pace With Inflation

Inflation is a more important factor than ever when it comes to retirement. Young workers must start saving early to increase their chances of keeping up with inflation. The consumer price index has spiked by about eight percent since the COVID-19 pandemic began, and it doesn’t show signs of stopping.

If the cost of living continues to rise, you must start putting money away now. You might be unable to devote the same amount to your retirement savings later. Make a sizable contribution to your retirement now before the economic climate worsens.

Longer Life Expectancy

Retired Folks celebrating achieving financial freedom

The average life expectancy is around the mid-80s for most developed countries, but that number is growing. If you prioritize your health, you might live into your late 90s or even longer. That means you need to plan for a longer retirement period. Start putting away money now, so you don’t run out of savings in your final years.

Not Reliant on Social Security Benefits

Speaking of longer life expectancy, a larger elderly population means more people will turn to Social Security benefits for help. This trend will put more financial pressure on the program and make its future uncertain. You don’t want to be too reliant on Social Security because it might not be a viable option in the long run without changes to the tax code.

Smart Financial Habits

As the old saying goes, good habits start young. Saving for retirement early in your career helps you develop well-rounded financial habits. If you start learning the ins and outs of saving in your mid-20s, you could be a financial guru by age 40. Every day is an opportunity to learn something new about smart saving strategies.

Time to Start Saving

Once you start your career, it’s time to put on your adult pants and make your financial decisions with the long term in mind—no more spending your paychecks on restaurants, concerts, and TV subscriptions. You’re in charge of your financial success now, so you need to act like it. Start saving for retirement ASAP. Your future self will thank you for it.

Leave a Comment


Stay in Touch With Us

Get latest from The Financially Independent Millennial in our Friday Newsletter