If you’ve just graduated from high school or college, or just landed a job that could lead to your dream career, thinking about a retirement savings account may feel, well, silly. I mean, you’re just starting out! You’ve got a whole handful of decades before you should even consider slowing down.
And yet, beginning to save for your retirement while you’re in your 20s and early 30s is one of the best financial decisions you can make–especially if you’re a millennial or part of the iGeneration.
Let me say that again – starting a retirement plan AT A YOUNG AGE and making regular contributions is amazingly smart – like super star brilliant!
Do it. #noregrets
Keep reading if you’re not convinced yet.
Not only are humans living longer lives (meaning they’ll need to stretch their retirement fund over a longer period), but Social Security is drying up and pensions are becoming less common. Heck, for younger generations, having enough money saved for retirement can feel daunting; unlike older generations who relied on pensions, the weight of preparing is essentially entirely on their own individual shoulders.
Thankfully, you have a friend in compound interest. Compound interest is, essentially, interest on interest; it means that you’re earning interest on your principal amount, as well as on the previous financial period’s interest.
Here’s an example, as explained on BankRate.com: If you start saving when you’re 25, and you put $2,000 towards your retirement each year for 40 years, you’ll wind up with approximately $560,000 by the time you hit 65. By comparison, if you start saving at 35, and put the same amount away annually, you’ll only end up with $245,000 at 65. (These scenarios assume 8 percent growth each year.)
It’s really as simple as that: You should start a retirement savings account as soon as you can, because the sooner you start setting money aside towards it, the more rapidly your savings will grow; time is 100 percent on your side here. And, like most saving habits, the earlier you start them, the harder they are to break. So, while it may seem annoying that you’re giving up a night or two on the town each month so you can start a retirement fund, future you will thank younger you for doing so.
And, if you’re in your 30s or 40s and haven’t started saving for retirement yet, either, it’s never too late. As with younger savers, setting aside ANY amount towards your retirement is better than nothing.
Take the time to find out more about different types of retirement accounts.