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When Should You Start Saving for Your Retirement?

when is the right time to start saving money for retirement

You will find a plethora of self-proclaimed financial experts raving all over the internet about the ideal time for stashing away money for retirement. We have a simple answer for you: you should begin saving for your retirement as soon as you receive your first pay-check!

If you start hoarding money in your early 20s, you have more time at hand and better chances to crank up your saving game at a breakneck speed. Here is how you should go about it:

Case 1- Start at a young age:

Say you begin saving at the age of 25 with $5000 per year in a tax-free retirement account for the next 10 years without breaking your streak. After 10 years, you don’t add in even a single dime to your retirement account. Still, at the age of 65, your savings would have swelled from $50,000 to $787,000 (assuming an 8% interest rate per year).

Case 2- Start in your mid-thirties:

Not all of us have the financial discipline to start saving early, so imagine putting off saving until you reach 35 and begin with the same number; $5000 per annum for the next 30 years. Your total would have grown from 150,000 to 611,000, keeping the interest rate constant at 8%.

Hoo boy! That’s a big difference!

Poignantly, one-fourth of American youth (who aren’t retired yet) doesn’t have a single penny in their retirement account, as per a recent report by the Federal Reserve Bank of America. But the good news is that you can always start over! Different people start planning retirement at varying stages of their lives.

  • Starting off 15 years before retirement:

Financial expert prefers life retirement plans over financial retirement plans, but at this point, your goals should be focused merely on accumulating retirement assets for rainy days.


  • Starting off 5 years before retirement:

If you are beginning now, you do understand the gravity of the situation. The clock is ticking, and you probably have already figured out what you want to do after retirement. You might have financial projections in mind of how much you are going to get in retirement. All you need to do is fine-tune the plan and strategize how you would organize your retirement assets such as RRSPs, pension plans, government reimbursements.


  • About to retire:

At this point, you must consider the implications of your short-term decision over long-term goals. You should segment your retirement assets from a tax perspective and pick some expert’s brain on this matter.


  • Already retired:

Now that you are retired, and your immediate source of income has come to an end, your retirement plan should be focused on the efficiency part. You need to prudently minimize your taxes and maximize your income streams by making sure that it lasts long enough to cover your today and tomorrow.


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