A Simple Answer to a Common Question: When to Start Saving for Retirement?

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Wondering when to start saving for retirement? Whether you’re just starting out in your professional life, or nearing the end of it, the answer is the same: Now!

Although actively working toward a goal retirement number may mean simultaneously budgeting to afford the life you have now and the one you dream of in the future, retirement is a goal worth working toward as soon as you can.

Here’s how you can make saving for retirement a habit you can start — and stick to — with ease.

Know That Saving for Retirement Can Benefit You Now

If you have a tendency to procrastinate on saving for retirement because it’s decades away, change your perspective. The money you contribute to retirement may create immediate financial benefits in the present, especially if your employer offers to match a portion of your contributions to a workplace retirement account.

Even if your employer doesn’t offer a match (or any type of retirement plan), or you’re self-employed, you still may be eligible for some tax advantages associated with saving for retirement, based on your income.

Contribute as Early as You Can

Financial experts often advise saving enough to replace 80% of your income for every year you’ll be retired. While that’s no small undertaking, saving for retirement early and consistently in your working life makes reaching that goal less daunting, thanks to compounding interest.

As NerdWallet explains, a 25-year-old who makes an annual income of $50,000 a year and has saved about $10,000 could reach her retirement savings goal by age 68, by contributing just 12% of her income toward retirement each year.

Pay off High Interest Debt

Paying down high interest debt limits your monthly cash flow temporarily, but there’s an upside once you eliminate those balances: You’ll have access to cash you’re accustomed to living without that you can put toward retirement.

Unlike the compounding interest that once made your debt grow, the compounding interest on your savings can help boost your retirement account balances over time.

Save in Small Steps

The idea of parting ways with hundreds of dollars in order to reach a major retirement goal may feel so overwhelming that you never get started. Instead, break saving for retirement into small steps that require little sacrifice. Earned some cash back from your rewards credit card? Put it toward retirement. Negotiated a better rate with your cable provider, mobile plan or on your car insurance? Deposit the savings into your retirement account.

Small contributions won’t require you to make drastic changes to your financial life — but will help you slowly build your retirement savings.

Put Your Raise Toward Retirement

The tendency to spend a little more freely when your earning power increases is known as lifestyle creep; avoid it by diverting additional income directly to your retirement savings.

When you don’t see your bonus, raise or commission enter (and leave) your paycheck or bank account, you won’t be tempted to spend it, and investing it in your future won’t feel like a such a sacrifice. If you’re able to use the additional income to make pretax retirement contributions, you may even lower your current taxable income and reduce the amount of income tax you owe.

Measure Your Progress Against Small Goals

Measuring your retirement savings progress against a major retirement goal can be discouraging. Instead, set and strive to reach small goals so you can see that your retirement savings efforts are paying off, step by step.

For example, CNBC reports that a 30-year-old should have at least the amount of their annual salary saved for retirement. By age 40, that person’s retirement savings balance should be at least three times their annual salary, and five times their annual salary by the time they’re 50 years old.

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Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service. It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.

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