This Retirement Mistake Could Cost You $200,000 or More
Creating a retirement savings plan can be complicated. You have to figure out where to invest -- in a 401(k) or IRA or other tax advantaged account -- and how much. You'll also need to make tough choices about what assets to invest in, and keep an eye on fees you pay.
All of this can seem really overwhelming, and it can be hard to know where to get started. But while you may not be 100% clear on what you need to do to get on track to save for your future, keep one simple thing in mind: You need to start saving ASAP.
Not saving as early as possible is the single biggest retirement mistake you can make. And, depending upon how long you delay and how much you save each month, even waiting just a decade could lead you to lose $200,000 or more.
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How big a mistake is it to wait?
A delayed start in making a retirement savings plan is way more costly than most people realize. In fact, waiting just a decade could mean you need to more than double the amount you invest to end up with a nest egg of similar size.
This chart below shows roughly how much you'd have at age 65 if you began saving at different ages and kept your savings rate the same throughout your career, using a reasonable assumption of an 8% rate of return.
| If You Save This Much a Month | Starting at 25, You'll Have This at 65 | Starting at 35, You'll Have This at 65 | Starting at 45, You'll Have This at 65 | Starting at 55, You'll Have This at 65 | Starting at 60, You'll Have This at 65 |
|---|---|---|---|---|---|
| $100 | $349,100 | $149,000 | $58,900 | $18,300 | $7,350 |
| $250 | $872,750 | $372,600 | $147,250 | $45,7506 | $18,400 |
| $500 | $1.75 million | $745,200 | $294,500 | $91,450 | $36,750 |
| $1,000 | $3.49 million | $1.49 million | $589,000 | $182,950 | $73,500 |
Calculations by author. Assumes 8% return and use of tax-deferred account.
As you can see, if you started saving just $100 a month at age 25, you'd have close to $350,000 by age 65 -- but if you waited 10 years to begin saving, your nest egg would be just $149,000.
Over that 10-year period, if you invested just $100 monthly, you'd have put just $12,000 into your account -- but that $12,000 would've become more than $200,000 for you to spend during retirement.
And, the more you save per month, the bigger the discrepancy in your final account balance if you wait a decade (or more) to start saving.
You should start saving right now
You can't afford to make the mistake of waiting a decade to start saving -- especially since you'd need to invest so much more later in life to make up for a late start. You should start putting aside cash today. To do that: