Saving for retirement is a lifelong process. One-third of Americans think they'll need between $1 million and $3 million saved to retire comfortably, according to a report from Charles Schwab, and saving that much cash takes decades of hard work.
But when you're young and just starting your career, retirement is likely the last thing on your mind. It's easy to put off saving for another day, especially when you may have a mortgage, children's expenses, student loans, and a laundry list of other financial responsibilities to think about. Put it off too long, though, and before you know it you'll be just a few short years away from retirement with little to nothing saved for your golden years.
Although it's never too late to save at least something for retirement, it's also never too early. The earlier you begin, the easier it is to build a strong and sturdy nest egg for the future.
The most common age to begin saving
Nearly 4 in 10 workers started saving for retirement in their 20s, a recent survey from Morning Consult found. Roughly one-quarter began in their 30s, and another quarter waited until their 40s or beyond to start saving. Also, 8% of workers stared very young, before age 20.
A separate survey from Nationwide found that among all American workers, the average age to start saving was 31 years old. That's promising news, because if you start saving in your early 30s, you'll still have several decades to build your retirement fund. Wait much longer than that, however, and you'll need to save a lot more each month to reach your retirement goals.
For example, say you want to retire at age 65 with $700,000 in your retirement fund. If you started saving at age 31, you'd need to save around $450 per month, assuming you're earning a 7% annual rate of return on your investments. But if you waited until age 40 to begin saving, you'd need to save roughly $925 per month to reach your goal. Delay until age 50, and you'd have to save approximately $2,300 per month.
Even if retirement seems far away, it will be here before you know it. And saving for retirement isn't something you can do overnight -- or even with 10 to 15 years of preparation. It takes several decades of saving consistently to create a nest egg worth hundreds of thousands of dollars, and the longer you put off saving, the harder it will be to catch up.
How to catch up if you're off to a late start
If you're behind on your savings, all hope is not lost. There are a few things you can do to make sure you can afford to live a comfortable, enjoyable retirement.
First, create a budget to map out all your expenses and see if there are areas where you can make cuts. Depending on how far behind you are on your retirement planning, you may need to make minor cuts or significant sacrifices to save as much as you should.
Sometimes, all it takes is multiple small adjustments to save a lot more each month. Divide your costs into different categories based on how necessary they are, and try to trim your expenses by at least a few dollars in each category. If you're seriously behind on your saving, you might need to take more drastic measures -- like selling your car or downsizing your home. If you're unable to save anything more now, just remember that you'll likely need to make major sacrifices in retirement. With little to nothing saved, you may end up depending on Social Security benefits to get by. And when the average check amounts to just $1,471 per month, you could find yourself struggling to make ends meet.
That said, Social Security can help make retirement a little more comfortable financially. Though you won't be able to depend on it for all your expenses (your benefits are designed to replace only around 40% of your preretirement income), it can help bridge the gap between what you have and what you need. And if you don't have much in terms of personal savings, you may be able to boost your Social Security benefits to make up for it.
One way to do that is to delay claiming benefits. The only way to receive the full benefit amount you're entitled to is to claim at your full retirement age (FRA). Claim before that (as early as age 62), and you'll receive a reduction in benefits of up to 30%. But delay past your FRA (up to age 70), and you'll receive extra money each month in addition to your full benefit amount. If you're struggling to save, that boost in benefits can go a long way.
There's never a perfect time to save for retirement. When you're young, you may think you have plenty of time. But it takes longer than you may think to prepare for the future, especially as retirement becomes more expensive. No matter your age, the key is to simply get started now.