The Secret to Saving for Retirement

The issue most people have with planning for retirement is that it always seems so far away. When we graduate college and are getting our first real jobs, retirement usually comes in last on our financial priority list. Rather, we are more worried about paying rent and still having some money left over to have a social life. We easily tell ourselves that we have plenty of time to figure retirement out later.

So, what’s the secret to saving for retirement? It’s never too early and there’s never a right time.

When you do hit your retirement years, the last thing you want to say is, “I wish I had started saving earlier,” because you can never make up for that lost time.


It is always the right time to save for retirement.

As we navigate through life and reach different milestones, we are constantly weighing our financial priorities. We have student loans and credit card debt to pay off. Then we need a new car and some money for our dream wedding. Next we are looking to buy a house and then have kids.

There is always a reason to postpone but in the long run you will regret it. Here’s why:

Let’s say you’re in your twenties and want to save $1 million by the time you retire in your sixties. Lets also say the market returns about 7% on average each year. Therefore, you’ll need to save about $5,000 per year, approximately $420 per month. If you’re making around $40,000 per year, this savings per month may seem too high. This is the reason why many twenty-something’s don’t start saving for retirement.

Now, lets fast forward to your forties: You’re making more money so you figure now is a good time to start saving. You’re making about $60,000 so to hit your $1 million retirement goal by the time you are in your sixties, you’ll need to save over $24,000 per year.

In the second scenario, this person only has about $35,500 to live on once they are putting enough away for their retirement. But, if this same person had started saving twenty years prior, they would still only be putting away $5,000 per year, giving them $55,000 to live on when they are in their forties.

To add the cherry on top, when you are young, you have little to no responsibilities. When you are in your forties, you likely have a family to care for, making it much harder to put so much money away each year.

If you are in your forties, don’t let this example persuade you to think it is too late! It is never too late (just don’t wait till you’re in your fifties!).


And don’t forget about the magical power of compounding interest over time – we’ll discuss this more in next week’s Newton’s Bark.

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