• Ethan Lang

Too Young to Think about Retirement? Think Again.

Updated: May 5

Do you think you're too young to think about retirement? Do you ever say this to yourself: “Oh, I'm so young; retirement is 40 years away; I will worry about it later.” Well, if this is you, you might just have to change your whole outlook on the subject.


So, are you really too young to think about retirement? Well, let's look into it. Today, I am going to provide how much you must save for retirement based on the age you start. this might allow you to gain a better perspective on whether you should actually start saving for retirement today or if it will be okay to push it off for another 5 years.


So, for this study, let's just make the assumption that the average American would like to retire with a nest egg of $1,000,000. Now, for this to happen, the individual will be investing in a portfolio that will return 7% post-inflation. Also, for this study, we are going to use our trusty friend Jeff.



If Jeff Starts Saving & Investing When He Is 20


In this first example, Jeff will start investing at the age of 20 hoping to reach his mark of $1,000,000. To accomplish this, Jeff has decided to stock away the same amount every month from the time he is 20 all the way until he retires at the age of 65. For Jeff to reach his goal of retiring with $1,000,000, assuming he is returning the 7% post-inflation return, he will have to save $272.55 every month and put it into his investment account at the end of every year.



If Jeff Starts Saving & Investing When He Is 30


In the second example, Jeff will start investing at the age of 30 hoping to reach his mark of $1,000,000. To accomplish this, Jeff has decided to not save any money in his 20’s and will stock away the same amount every month from the time he is 30 all the way till he retires at the age of 65. For Jeff to reach his goal of retiring with $1,000,000, assuming he is returning the 7% post-inflation return, he will now have to save $563.39 every month and put it into is investment account at the end of every year. Because Jeff has decided to wait ten years to start investing, he will have to save double the amount of money because of compound interest and the time power of money.



If Jeff Starts Saving & Investing When He Is 40


In the third example, Jeff will start investing at the age of 40 hoping to reach his mark of $1,000,000. To accomplish this, Jeff has decided to not save any money in his 20’s or 30’s and will stock away the same amount every month from the time he is 40 all the way till he retires at the age of 65. For Jeff to reach his goal of retiring with $1,000,000, assuming he is returning the 7% post-inflation return, he will now have to save $1,231.38 every month and put it into is investment account at the end of every year. Because Jeff has decided do wait twenty years to start investing, he will have to save more than quadruple the amount of money if he were to start investing at age 20 because Jeff’s investment doesn’t have the ability to grow as long and reap the rewards of compound interest.



If Jeff Starts Saving & Investing When He Is 50


In the third example, Jeff will start investing at the age of 50 hoping to reach his mark of $1,000,000. To accomplish this, Jeff has decided to not save any money in his 20’s, 30’s, and 40’s. He will stock away the same amount every month from the time he is 50 all the way till he retires at the age of 65. For Jeff to reach his goal of retiring with $1,000,000, assuming he is returning the 7% post-inflation return, he will now have to save $3,099.58 every month and put it into is investment account at the end of every year. Because Jeff has decided do wait an entire three decades to start investing, he will have to save about 11x the amount of money if he were to rather start investing at age 20 because Jeff’s investment only has the opportunity to grow for 15 years rather than 45 years if he would of been investing in his 20’s, 30’s, and 40’s.



Final Thoughts


Although I am not stating that everyone must start investing at the age of 20, it is really not a bad place to start. I understand some people will need to pay off college, their house, and many other liabilities before investing, but this truly shows a person how much they must invest to hit their retirement goals. Even if your retirement goal might not be $1 million dollars, just take the concepts from the examples to show you the percent more you might have to invest based on when you start.


So again, if there is any advice that I could leave you with it is this: start investing early and often to reap the rewards of compounding interest.



Disclaimer: I am not a financial advisor, so please review all of this advice with your CFP or financial advisor first.

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