The Most Important Retirement Table You'll Ever See

I was talking to a friend of mine recently who's in her mid-40s, and she told me that she's yet to save so much as a dime in an IRA or 401(k) plan, despite working full time for most of her adult life. Her spouse, meanwhile, contributes minimally to his workplace 401(k), and while I don't know what his exact savings rate is, my friend confirmed that he only puts in enough money to get whatever match his employer offers.

When I asked my friend why she and her spouse weren't saving more for retirement, her response was something along the lines of, "Well, I don't really think we need to." When I pushed harder, she told me she expected their costs to be a lot lower in retirement -- low enough that their Social Security benefits would probably suffice.

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It was at that moment that I felt the need to give her a stern wake-up call. I explained that while yes, she'd shed many bills in retirement by not having to pay for child care and downsizing to a much smaller and less expensive home, she'd still be looking at a host of expenses that Social Security alone most likely will not be able to cover.

I'm not sure if I totally convinced her to talk to her spouse and ramp up on the savings front, but even so, she and her husband are already halfway through their careers. That means they've already lost out on many years of wealth-building opportunity.

If you're reading this and you're younger, you may want to do the opposite of what my friend and her husband are doing and start prioritizing your retirement savings from an early age. Doing so could leave you with a lot more wealth down the line.

Your investment window matters

The more time you give the money in your IRA or 401(k) plan to grow, the larger a nest egg you're apt to end up with. And you might really need that larger nest egg to cover your many retirement expenses.

So, let's say you're able to contribute $300 a month to a retirement savings plan, and you invest that money at an average annual 8% return, which is a bit below the stock market's average. Here's the savings balance you're looking at retiring with, depending on how many years you give yourself to save.

[Editor's note: This table has been corrected to note it is a $300 monthly contribution.]

*Totals are approximate. Calculations by author.

The reason this table cuts off at 50 years is that many people first start working full time in their early 20s and can't steadily fund a retirement account before then. So that 50-year period accounts for someone working until their early 70s.

The point, however, is that a longer savings and investment window could set the stage for a far more comfortable retirement. So even though you might have other things to spend your money on and may not think it's important to save for retirement from an early age, it is.

Incidentally, I let a few years go by in my early 20s when I didn't contribute to a retirement plan. Back then, I was busy trying to build an emergency fund and pay off the loans I took out to get my degree. But I've been steadily funding an IRA or 401(k) plan since my mid-20s and plan to continue doing so as long as I'm able to earn a paycheck.

If you're already into your 20s and haven't started saving for retirement yet, don't panic. But try your best to begin soon. And if you're older, or if you're in your 40s like my friends are, do yourself a favor and reexamine your budget to carve out room for IRA or 401(k) contributions. Your future really depends on it.