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retirement colorado kansascity

Starting Early Can Make a Big Difference When Saving for Retirement

retirement colorado kansascity

Most people can’t rely on Social Security benefits to be your only source of income in retirement. That means you’ll have to amass a savings of your own, which many do using a company-sponsored 401(k) or IRA account. According to a recent article by Fidelity, you should am to have roughly 10x your annual salary saved by age 67 in order to retire comfortably. Of course, the number varies based on how you plan to spend your money during retirement but regardless, it takes decades of hard work to sock away enough cash to allow you the lifestyle you desire for your retirement years.


Unfortunately, many workers are waiting too long to start saving. New data is showing that current retirees waited until an average age of 40 to begin saving for retirement. While we believe it’s never too late to start, we’d like to demonstrate how much you’d miss out on if you waited until age 40 to begin saving.[1]


If you were to invest $1, at age 40,  into an account that produces average returns, that dollar will be worth approximately $2.67 when you reach age 65.


If you were to invest $1 at age 30, it would be worth about $3.95 when you reach age 65.


If you were to invest $1 at age 20, it would be worth about $5.84 when you reach age 65.


A ten-year difference in when you start saving could result in as much as hundreds of thousands when it comes time to retire. When your account earns returns, they can be reinvested to generate additional earnings. That’s called compounding and it’s powerful. The earlier you start, the less you’ll have to invest to reach your goal.


Here’s another example (for simplicity sake, we aren’t reflecting taxes or investment fees):


If you started investing $200 per month in your retirement fund 40 years before you plan to retire, with a return of 7% compounded annually, you will have invested $96,000.00 and end with a balance of $497,102.41.


If you started investing $320 per month, but only 25 years before you plan to retire, you will have contributed the same $96,000.00. However, you’re ending balance would only be $251,990.17.


The same total amount invested will result in you getting nearly half what you could have if you started 15 years earlier.


The takeaway: start as early as you can. If you are unsure about your goals and how much of your paycheck you’ll need to invest to feasibly get there, we can help you assess your situation.


Investing involves risk, including possible loss of principal. Insurance and annuity guarantees are backed by the financial strength and claims paying ability of the issuing company.

[1] Source: https://www.transamericacenter.org/docs/default-source/retirees-survey/tcrs2020_sr_retiree-retirement-amid-covid19.pdf (page 76)

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