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Think You Can't Afford Retirement Savings? Here's Why Saving Enough Will Only Get Harder if You Wait

By Christy Bieber - Mar 13, 2020 at 9:02AM

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Now is the best time to start saving.

Most people know that saving for retirement is important. Unfortunately, despite this knowledge, millions of Americans aren't saving as much as they should be. There are lots of reasons why that happens, but one of the biggest is a belief that they can't afford to save. 

If your budget seems tight right now and you plan on saving more later in life, you're setting yourself up for disaster. Saving more won't get easier as you get older, even if your income increases. In fact, there are lots of reasons hitting your target retirement goal will only get tougher the longer you delay. 

Jar filled with coins with plant growing out of it.

Image source: Getty Images.

Lifestyle inflation can eat away at income gains

Many people think they'll save more as their salary goes up. The problem is most people upgrade their living standard as their income rises.

A raise or better job might become an excuse for a bigger apartment, a nicer car, or dining out at better restaurants. Before you know it, your spending has expanded and you're still struggling to save.

Many people acquire more financial obligations as they age

Getting older generally comes with life changes and new financial challenges you have to meet. if you have a child, for example, the costs associated with raising your baby can add up to tens of thousands of dollars every year. If you buy a house, you'll have a mortgage to pay. And as your kids grow, you'll have college costs to cover. Your own health issues, and health issues of your spouse or parents, could also lead to more out-of-pocket spending. 

Many of the new financial obligations you acquire aren't really optional. You have to feed your baby, after all. And as these new obligations pile on, they make it even harder to save -- especially if you've been upgrading your living standard as you aged and you now don't want to downgrade your lifestyle to afford the new expenses you've taken on. 

You have less time for compound interest to work for you

If you start saving when you're pretty young, you only need to put away a small amount for the future because you have many years for your small retirement account contributions to add up to a significant sum of money. Investing funds early also allows for lots of time for compound interest to work its magic. This happens when the money you invested produces returns that are reinvested and you earn interest on interest. 

If you wait to start investing, you have to save hundreds or even thousands more to end up with the same size nest egg. If your goal is to save $1 million for retirement, for example, you could get away with investing just $287 per month if you start saving at 25, retire at 65 and earn an 8% return. But if you wait until age 40 to start, you have to save $1,055 per month to hit your goal. 

Obviously, it's a whole lot easier to find $287 per month to save than to sock away over $1,000. 

Don't delay retirement savings because you think saving will get easier later

While it's easy to imagine some distant day in the future when you'll finally get that raise or pay off that debt and retirement savings will become simple, this just isn't reality. If you want to have a financially secure retirement, you need to start saving today. As you can see, the longer you wait, the harder things will get -- so don't make life more difficult for your future self.

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