In partnership with

Retirement Download

Strategies for a successful retirement

The right age to start saving for retirement

We typically ask people to start saving as early as possible but that’s not easy. In an earlier issue, we talked about how much you need to save to have $5 million by 67 and our subscribers shared how saving $2,000 a month is not possible in your 20s.

Think about it, most 20 to 24 years old make about $38,000 a year. This means saving $24,000 may not be easy since you’d only be left with about $14,000 per year. This is not enough to cover education and day-to-day expenses.

So, what’s the right age? There is no answer to that… in simple terms, as soon as you can.

You do not have to start waiting to save and you do not need to have enough money to save. The key lies in reducing your expenses. With the right planning, you can even save up to 70% of your income.

Think about a 24-year-old web developer living in a country with a low cost of living and working for a US company making $38,000 a year. Let’s assume that country is India where the average person needs only about $500 to live. Even if this said person spends $8,000 a year, they’d have $30,000 to save and invest, thus bringing them closer to their goal of $5 million.

But, most of our subscribers are not from such countries. So, if you are in the US, you should ideally start planning for your retirement in your 20s. Don’t worry if you cannot save $2,000 this year, you can start as low as you easily can and then move up as you start to make more money.

The chart below shows median earnings by age. You can look at it to determine the right age to save (based on your expenses and earnings).

The Milken Institute, an economic think tank, found that young adults need to start saving regularly by age 25. This is when most people will be making above $50,000 a year. Assuming you’re not dealing with debt and have your expenses under control, you’d be able to save a good chunk of your income at this age.

A weekly $100 investment in the stock market, earning a 7% annual rate of return, will over time compound into savings that top $1.1 million by the age of 65. This shows it is possible (and usually easy) to become a millionaire but we understand most people do not want to be in their 60s before they have a million. This is why the amount of money you save should increase with time.

We think 25 is a good time to start but if you are making money in your teens then you should start saving then. It is never too early and never too late to save money.

Also, twenty-five is the age Fidelity Investments and other financial service companies often use when offering guidelines on how much money a person should aspire to save for retirement.

Remember, how or where you save is as important as when you save. So, make sure to plan carefully. Check this issue for some tips on turning your money into an income stream.

Watch this video for more information:

2 Cards Charging 0% Interest Until 2026

Paying down your credit card balance can be tough with the majority of your payment going to interest. Avoid interest charges for up to 18 months with these cards.

Learn More

Resources

Calculators - Retirement, Budgeting, Investing

Make Money in Retirement

Stock Deep Dives

👩🏽‍⚖️ Legal Stuff
Nothing in this newsletter is financial advice. Always do your own research and think for yourself.