To a young person, retirement can seem a lifetime away…and rightly so. However, many of their more experienced peers could tell them that time goes by faster than you think. That familiar dread of going to work on Monday can turn into a paralyzing panic that you’ll have to do it every Monday for the rest of your life if you wait too long to consider the future, but it seems a bit excessive to start saving for retirement with your first paper route.
The right time to start considering retirement varies by your goals, but it can certainly be determined that 40 is a bit too late. A standard rule of thumb is that a safe retirement fund can keep you near your working salary for at least 20 years after retirement (you can learn more here).
With only around 30 years left for saving, the increased contribution level required to build a viable retirement fund can be too much for the average budget to comfortably endure and discourage you from saving, so starting at this age likely means delaying retirement 5 or more years.
30 is a better time to get your retirement started, and is a time when many people begin to consider what happens after their career. If you save just a third of your yearly salary every year from age 30 to age 70, you will have amassed enough money to sustain you for over 15 years after you retire even if you make no other investments.
This can be easily done be deferring a small portion of your salary to an employer-matched 401k. With a decade more in interest, a 30 year old will have a much easier time of reaching his final retirement goal.
While 30 is a good age to begin saving, the earlier the start, the easier it is. Just a five year difference in saving time can equal hundreds of thousands of dollars more in your retirement fund, and as the principal has more time to grow and mature the earlier you start, it could even mean an earlier retirement.
The contribution level can be somewhat smaller as well because you have a longer time to wait, so it is also proportionately less expensive to save with an early start. Most people 25 and younger seldom consider retirement, but considering it now could mean not having to worry about it later.
Saving for after your career works much better as a marathon than a sprint, and building a retirement fund is something that should be gradually done over the course of a career. There is no concrete age to start considering retirement, but the longer you wait, the more difficult it will become to reach your goals.