Starting to save for retirement as early as possible will maximize the chances you have the money you need as a retiree. With the power of compound interest, you can save much less if you start early and still end up with a substantial nest egg, making life a lot easier.
Many people aren't getting started at the beginning of their careers, but are waiting until they've been in the working world for a while. That means they're falling behind, and catching up presents financial challenges.
Here's the average age that people start saving
According to recent data from Wells Fargo, the average age that workers today start saving for retirement is 29. This is a vastimprovement, as current retirees indicated they began saving at 40 on average. But there's still plenty of room for improvement.
Younger workers today face challenges that older workers didn't. They're less likely to have pensions from their employers, for one thing. Many experts also predict they won't earn the same kinds of returns that older workers did. They're also likely to live longer and more susceptible to face Social Security benefit cuts, as the program is scheduled to run short of funds by 2035.
Getting that 11-year head start on retirement savings compared with current retirees can help mitigate some of the challenges that future retirees face. But starting at 29, on average, means missing out on years of savings after reaching adulthood, so today's workers have made hitting their retirement goals that much harder.
How much does waiting to save cost you?
If you started saving at 21 and earned an average 7% rate of return, saving $1 million by age 65 would require monthly investments of $283.66. But by waiting until 29, you'll almost double the amount you need to invest: You'd have to put away $514.14 per month to hit your $1 million goal.
Wait even longer, and the amount you need to save each month to reach $1 million just goes up from there. So if coming up with a little over $280 a month might seem challenging as your career is getting started, it won't get any easier if you wait.
Start saving ASAP to build the nest egg you need
If you're still under 29, you can beat the average and start saving now to set yourself up for a secure future.
But if you're over that age, you can at least start today and avoid making things more difficult in the future. You may need to tighten your budget to free up cash, but sacrificing now to make smart investments can help ensure that you have the money you need to enjoy retirement.