When Should You Start Saving for Retirement?

When you’ve just started your first job, retirement seems a long way off — but as you pursue your career, make more money and build your financial health, that distant future gets a lot closer. When should you start saving for retirement, and how can you stay on track?

 Let’s take a closer look.

When to start saving

Generally speaking, the best time to start saving for retirement is “as soon as you can.” The earlier you begin saving, the more money you’ll have put away for later. Some options may even provide the opportunity to earn interest.

 However, not everyone has the flexibility to immediately put away part of their paycheck, especially early in a career. For this reason, many experts — including those from Experian — recommend starting around your mid-twenties if possible. You can always begin later, but your overall savings may be significantly reduced in the long run. 

Of course, there’s no single age when everyone should start saving. It all depends on you: how much you make, what your expenses and responsibilities include, what your career path looks like and — perhaps most importantly — which opportunities you take advantage of.

Tips for growing your retirement savings

There’s more to retirement than just carving out part of your paycheck. Here are just a few tips to get you started:

#1: Understand savings options

When it comes to retirement, the words “tax deferral” can quickly become your new best friend. Savings options with this feature allow you to put money away before taxes. That means you’ll have more funds to earn interest. You’ll pay income tax later when you begin withdrawing your funds.

However, you should keep in mind that not all retirement savings options include tax deferral. Each one has different features and limitations; for example, a Roth IRA (individual retirement account) is funded by after-tax money, which means you pay taxes now instead of later. It’s important to do your own research, understand these options and choose what works best for you.

#2: See what your employer offers

Many employers offer retirement matching plans up to a certain percentage of your income. For example, if you put $1 of your earnings into a savings account every month, your employer will add an additional $1. Read your employee handbook, talk to your manager or reach out to human resources experts at your employer to learn more about your options.

#3: Increase your contributions over time

When you first begin saving, you might contribute a small amount from your paycheck — perhaps 1%. As your paycheck grows, so too should your contribution. Try to make small increases to that percentage every year — that way, you make faster progress toward your retirement goals.

#4: Make your own plan

Although there’s plenty of advice about how and when to save for retirement, remember that your financial health is unique. That means you should make a plan based on what works for you. Maybe that means starting with a regular savings account that you can deposit to and withdraw from at your own pace — that way, you have full control and visibility until you’re ready to explore investments, IRAs and other options.

Want to learn more about retirement savings? Reach out to a Vectra bank professional today.