If you’re in your 20s or 30s, retirement is probably the last thing on your mind. After all, how can you save money for a date far in the future when you have other pressing priorities, such as getting out of debt and maybe saving for the down payment on a house?
But if you had any idea how lucky you are to have so much time on your side, you’d take the retirement issue more seriously. Consider this: Let’s say you want to retire at age 65 with a million dollars. If you start saving at age 20, you only have to save $270 per month (all calculations assume 7% investment returns). If you wait until you’re 30 to start saving, you need to save $555 per month. If you wait until you’re 40, you have to save $1,235 per month. Obviously, the sooner you start saving, the less you need to save to reach a one million dollar goal.
If your company offers a 401(k) plan, sign up for it and contribute as much as you can afford. If not, open an IRA and contribute at least $3,000 every year. If you start when you’re 30, you’ll have over $450,000 at age 65. And don’t be afraid to invest for growth. With your long time horizon you can tolerate market volatility in an attempt to earn higher returns