Whether you’re new to the job market or have been working for years, it’s important to start saving as early as possible with small amounts while respecting your budget and your reality.
To show you just how beneficial it is to start saving when entering the workforce, let’s look at Tom and Mark, both 65-year old workers who managed their retirement savings differently over time.
Between 20 and 30, Tom decided to save $20 per pay. Mark, on the other hand, didn’t save anything before he turned 30. He didn’t think it was worth it and preferred to wait until he earned more to begin saving for retirement. Marks started saving at age 30, investing $100 per pay. Tom decided to follow suit and began investing $100 per pay starting at age 30.
Tom has saved over $277,000 for his retirement whereas Mark has saved $240,000, $37,000 less than Tom*.
In other words, Tom will receive $3,000 more per year until age 85 thanks to the $20 per pay he invested in his twenties. This is a big gap. Because he started saving smaller amounts sooner, Tom can travel more every year or spoil his grandchildren even more!
We encourage you to start saving as early as possible, regardless of how much money you have. You’ll be surprised to see how it can pay off in the long term! If you have access to a plan in which the employer also contributes, we recommend that you maximize your contributions. This will help you get the employer’s maximum contribution.
Need advice?
Speak to your financial security advisor. If you don’t have an advisor, find an advisor today.
*This amount was calculated assuming an annual net return of 5% and 26 pay periods per year.
When should you start saving for retirement?
You don’t need a lot of money to begin saving for retirement. It’s not always possible to invest large amounts to save for retirement, but it’s also not necessary.