Sentiments toward saving for retirement have changed over the years. For a variety of reasons, many younger employees are even thinking about saving towards their retirement any time soon.
Some people would rather enjoy their hard-earned money while they are young and healthy. They’re unsure of whether or not they’ll be able to enjoy the funds they save when they’re older, so why not be sure to enjoy those funds now? Others may not be planning on the usual retirement scenario.
While these sentiments are understandable, those younger generations who don’t begin saving early on could be missing out on big savings that could impact their future. Even if you don’t plan a traditional retirement, you don’t know what your future will bring, and how your plans may change. A change of plans cannot rewind your retirement savings, so starting to save earlier on can help you navigate these changes.
Why Saving for Retirement Matters
Common Challenges to Saving for Retirement
In addition to a mindset shift towards retirement savings, there are also several practical challenges the younger generations are facing.
- Student loan payments
- Finding a reliable first job out of college
- Low starting salaries
In addition to these common challenges, not all young workers will qualify for employer-sponsored retirement plans.
Why Saving Early Makes a Difference
The earlier you start saving, the less you have to save each month. For example, based on a return of 8%, if someone wants to have roughly $2.3 million dollars by the age of 67, they would only have to save $475 each month if they start at the age of 22. On the other hand, keeping all the same conditions, except the person doesn’t start saving until age 42, they would have to save $2,515 each month!
To assume that you can start saving later in life is a sad misconception. Clearly, saving over $2,000 per month versus under $500 per month is a big difference. If you think saving $475 is hard, how much harder would $2,515 be!
Note: $2.3 million dollars is a ballpark number for a comfortable retirement. A financial professional is an invaluable resource to calculate how much you actually need, as they will take into consideration several factors including location, years in retirement, and health factors.
Bonus: Why Saving for Retirement Benefits Other Areas of Your Life
The earlier you begin saving part of your paycheck, the more beneficial habits you will develop that will affect other areas of your life as well. Throughout your life, you will have different opportunities that will require you to save.
- Building a business or side hustle
- Buying a home
- Going on a once-in-a-lifetime vacation
When you’re saving for these special occasions, consistency is important to make these dreams come a reality. If saving on a regular basis is a challenge, you can set up automatic transfers as soon as your paycheck is deposited into your account. Determine a dollar amount, and that can automatically be transferred into a savings account.
Find a Job That Will Contribute to Your Future
For help finding a promising job that suits your career goals, contact Axiom Staffing Group.
