When you’re in your 20s and 30s you may see no need to save for retirement just yet. That’s a long way off, and there will be plenty of time to save in the future, right? While that may be true, just know, the less you save now, the more you’ll need to sacrifice later.
To put it into perspective, according to the U.S. Department of Labor, the average adult spends nearly 20 years in retirement. As you ponder how much you may need to save, here is some information to get you thinking about the future.
Start Saving Now
To get you in the right mindset, it is estimated that you will need at least 70% of your retirement income saved if you want to maintain your current standard of living. So, where do you begin? The 50/20/30 rule is an easy place to start, where 20% of your income should go toward investing in your financial future. This includes paying off debts but also should include saving for retirement.
How much should you save? That all depends on your desired future financial comfort level.
Here is a simple example that should help you understand the importance of compound interest and how saving early can make a big difference. A person that invests $5,000 a year between the ages of 25 and 35 will have just over $602,000 by the time they retire (expecting a 7% yearly return on investment and retirement at the average age of 65). A person that invests that same $5,000 between the ages of 35 and 65 will only see a return of $540,000. That’s a difference of nearly $62,000 dollars! The sooner you save, the more you will receive in the long run.
More Ways to Save
Putting money in the bank now to gain interest over time is extremely important for your retirement, but don’t forget there are other ways that can add to that sum. If your job offers a 401(k) option, make sure to sign up as soon as possible, especially if they match up to a certain percent. This is something that will mostly go unnoticed on your weekly paycheck stub, but you will be extremely grateful when it’s finally time to cash it in. You may also want to look into investing in a Roth IRA.
As you receive pay increases, increase the amount going into your retirement funds. In this way you can decrease the amount of time it will take until you are able to retire while also being able to continue the same standard of living. As long as you are comfortable with your current lifestyle, put away as much as you can now to reap the benefits down the road.
Let Us Help
No matter where you are in your current financial journey, Mercer Savings Bank has the information and options you need. We offer the savings and investment options that will ensure you are prepared for retirement.
You can trust Mercer Savings Bank as your all-in-one financial center. Contact us today to learn more about ways to prepare for retirement.