Is It Ever Too Late (Or Too Early) to Start Saving for Retirement?

While many people ask about how much they need to save for retirement, not as many people ask when to start saving for retirement. However, when you start saving has a big impact on how much you need to save each month.

The good news is that it really never is too late or too early to save for retirement. It is just a matter of how much you need to set aside.

Can someone already years into their career save a sizable amount of money for retirement? Just how much could they realistically have accumulated by the time they exit the workforce and enter retirement?

When to Start Saving for Retirement – A Look at the Numbers

Below are calculations for how much a person will have saved who starts saving for retirement at age 35, 40, and 45.

• The calculations will assume the person saves $200 a month.
• The investments will grow at a rate of 8%.
• The calculations assume that the person will retire at age 65.

Start Saving for Retirement at 35 – How Much Will You Have?

• Years saving: 30 years
• Total Amount Contributed: $72,000
• Interest Earned: $209,710.12
• Retirement Balance: $281,710.12

Start Saving for Retirement at 40

• Years saving: 25 years
• Amount Contributed: $60,000
• Interest Earned: $121,798.19
• Retirement Balance: $181,798.19

 Start Saving for Retirement at 45

• Years saving: 20 Years
• Amount Contributed: $48,000
• Interest Earned: $65,799.81
• Retirement Balance: $113,799.81

As you can see, if you start saving a mere 15 years earlier, you can easily accumulate more than $150,000 more for retirement than if you wait.

What Happens if You Can Save $500 a Month?

If you use the same assumptions for growth rate (8%) and still plan on retiring at age 65, but opt to save $500 a month, you end up with significantly more money.

• Start saving for retirement at 35 at $500 a Month – you end up with: $704,275
  
• Start saving for retirement at 40 at $500 a Month – you end up with: $454,495
• Start saving for retirement at 45 at $500 a Month – you end up with: $284,499

As you can see, a person who begins saving well into their career can still accumulate a significant amount of money by the time they retire. Starting earlier certainly would have given their investments more time to grow, but even with a reduced amount of time, increasing the monthly contribution amount can have a huge impact on the end result.

How to Start Saving for Retirement at Age 50 or Older

Are you in your 50s or older? Late-savers may have to give some extra thought to retirement planning.

The best way to save for retirement is to have a really good understanding of what you have and what you need. The best retirement calculators can do that for you. Look for one, like the Boldin Retirement Planner, that really helps you assess Social Security, home equity, your ability to work and other assets beyond retirement savings.

• Save as Much as You Can: You can somewhat make up for a late retirement saving start by saving more each month.
• Work Longer: Many people want to retire as early as they can; however, the worst-case scenario is to run out of money when you’re elderly and re-entering the workforce is not an option. People who start saving later in their career may consider working a few extra years to contribute more funds to their total, and give their money more time to grow before they begin drawing from it.
• Look for Passive Income: Another option is to invest their funds into something that will give them a revenue stream throughout their retirement years such as a business or a rental property.
• Reduce Lifestyle: As people plan for retirement, it’s important that they have the right expectations as to the lifestyle they will live in their post-career years. They will have to take a close look at the funds they have available, and plan their lifestyle accordingly.
• Consider Your Home Equity: If you own your home, the home equity you have can be used to help fund retirement.

It’s never too early to begin planning for retirement, but if a person has let the years slip by, it’s also never too late. By putting away as much as they can once they do start to save, in conjunction with proper planning, a person can still have a happy and financially secure retirement.

You may be in your 40s, 50s, or even 60s, but it is not too late to plan your retirement.

Travis Pizel is a personal finance blogger at Enemy Of Debt where he candidly shares his family’s financial experiences, struggles and successes. As a father and husband he provides a unique perspective on balancing debt, finances, and family.