Why You Should Save Early for Retirement

retirement home
retirement home

When you’re in your twenties or even your early thirties, retirement may be the furthest thing from your mind. In fact, the numbers prove young people don’t think much about retiring at all. The National Institute on Retirement Security said that two-thirds of people ages 21 to 32 years old have not started saving for retirement.

Unfortunately, they are missing out on a huge opportunity because saving early for retirement has many benefits. First, you can make your money work longer for better returns. Second, retirement savings can have reduced taxes. And, lastly, the earlier you save for retirement, the more options you have in terms of investment choices due to the fact that younger people can take more risk with retirement savings.

Why Too Many People Aren’t Preparing for Retirement Anymore

In the past decades there has been a shift in the cultural attitude towards retirement. The pandemic only strengthened young workers’ resolve to enjoy their lives now than wait for a day that might never come. Many young people believe that if they wait too long to travel the world and go on an adventure, they might be too old and/or physically weak to enjoy what they’ve worked for.

Even with excellent pay, younger people don’t intend to stay in jobs they don’t love. They want to see the world right now and not think about retirement. While there is nothing wrong with enjoying life now, the real problem is not preparing for the future.

Even if you are not sure you’ll live long enough to see your retirement years, you still have to prepare for your financial future. Although young people suffer from student loans and many times below-average salaries, there are still plenty of ways to prepare for the future. Remember that the earlier you start saving, the easier it becomes. It’s like working out daily. It just becomes a part of your life where you have built the discipline to save money for retirement consistently and without fail.

Invest Your Savings

Don’t let your money stay in the bank. Instead, invest it into funds that can multiply your money in the long run. The earlier you begin investing, the more your money will grow. The power of compounding is usually underrated. Saving and investing for many years leads to exponential growth in the investments. For example, a 22-year-old who can invest $475 a month today in funds that can earn an average of 8% annually can have nearly $2.4 million at the age of 67. If you do that at 57 years old, you’ll only get $89,179 by your 67th birthday. That’s not enough for retirement.

In short, you need to make the money work for you. Invest that money into funds and forget about it until you need it for retirement. Just make sure you put your money into reputable funds or let licensed and experienced fund managers handle it.

Lower Your Income Taxes

If you have a 401(k) or 403(b), the money coming into those funds should not be taxed. The same is true with a self-employed retirement account or a traditional IRA. You have to check your tax bracket, too. Some of you may be in the 24% tax bracket, which will save you $240 for every $1,000 of taxable income.
You can invest more money if you save on taxes. Instead of paying those sums directly to the Internal Revenue Service (IRS), you can use that money to fund your investments. Of course, this doesn’t mean you are free from paying taxes. You need to pay the taxes when you withdraw the money out of the retirement account, but by then, the hope is that you are already in a lower tax bracket.

Develop a Habit

Saving is a habit, one that you should develop early in your life. By disciplining yourself not to spend every cent of your paycheck, you can save for more future expenses, such as building a business, owning a home, and going on trips. Are you having trouble developing this habit? One thing you can do is automate it.

Every month, automatically transfer a portion of your salary into an investment fund or a savings account. You can set this up in your online bank account so that you will save money every week. This money will go to your retirement fund. You can even ask your employer to deduct the money from your salary, which automatically goes into your retirement fund. This way, you won’t have a choice, and you cannot withdraw from the fund without a valid reason.

Build a Retirement Plan

Either create your own plan or hire a financial planner to help you. By having a plan in place you can see just how important it is to save money while you are young. You can also use the plan to track your progress towards your financial goals.


Everyone will agree on the importance of retirement, but not everyone understands how important it is to start early. It gives you a massive advantage because you will have more time to invest that money or find better options that will grow the money. The younger you start investing, the better your position will be when it’s time to retire. Time is on your side.