What Waiting Until 35 To Start Saving for Retirement Really Costs You
When you’re in your 20s, retirement often feels very far away and like something you’ll start planning for eventually. Then you hit 30 and life gets busier; you might be raising a family, paying a mortgage and dealing with other financial obligations. So, you push retirement saving off until your mid-30s when things start to feel more stable.
However, that delay often comes with a price tag most people don’t see. Here’s what waiting until 35 to start saving for retirement actually costs you.
Check Out: I’m a Financial Advisor: Here’s How Often You Should Check Your Retirement Account Balance
Read More: Start Growing Your Net Worth With Smarter Tracking
You Lose Your Most Valuable Asset: Time
Time matters more than how much you invest when it comes to retirement savings. The earlier you start, the better. Even small amounts can grow into a considerable balance due to the power of compounding.
For example, someone who invests $250 a month starting at age 25, earning an average 7% annual return, could end up with around $598,905 by age 65. If you save the same amount starting at 35, it grows to roughly $283,382 by the time you retire. That’s less than half despite only a 10-year delay.
Keep Financial Literacy Month going — learn how the MoneyLion app helps you track, manage and move your money in one place.
You’ll Need To Save Significantly More To Catch Up
Starting later means fewer years for your money to grow. If you want to catch up, you’ll need to contribute more each month. Using the same example: Starting at 25, you need about $250 a month to hit roughly $600,000 in retirement savings. But when you start at 35, you need to save around $528 a month to reach a similar amount.
That’s more than double the commitment. And for many people, that kind of increase may not make sense, especially with other financial responsibilities.
Your Money Does Less of the Work
Your contributions matter the most when starting to save for retirement. The earlier you start, the more time your money has to work harder for you. A large portion of your retirement balance often comes from returns, not the money you save.
When you wait until 35 to start saving, you reduce the number of years your money would have compounded. That means a higher percentage of your balance has to come from your own contributions and a lower percentage in returns. In short, you’re doing more of the work instead of your money doing it for you.
The Bottom Line: It’s Not Too Late
If you’re already 35 or older, it doesn’t mean it’s too late to get started. Here are smart moves to make going forward:
Maximize employer benefits: If your employer matches your retirement contributions, consider maxing out by contributing to that match. You can also max out other plans.
Use tax-advantaged accounts: Consider contributing to a Roth individual retirement account (IRA) or a health savings account (HSA) if you qualify. These accounts let you grow your savings tax-free and allow tax-free withdrawals in retirement.
Increase your contribution rate aggressively: Once you have an emergency fund and have paid off high-interest debt, consider increasing your retirement contributions. Even a 1% bump each year adds up significantly over 30 years.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
More From MoneyLion: