Is it important to start saving early for retirement?

      No Comments on Is it important to start saving early for retirement?

If you are between 40 and 50 years old, it is very possible that you are beginning to worry about saving for future retirement, especially seeing the current panorama, where it is not at all clear that the retirements, as we know them in Spain, will continue existing

Also if you are young, say about 20 years, and you are a little aware of the economic news, you are also beginning to think that you should start to be interested in your retirement, even if you still have many years left for it.

For the former, they have the advantage that they spent a large part of their adult life without allocating anything to save for retirement. This evidently gave them more flexibility with their money in their 20s and 30s than people who, with their same age, were already saving for their retirement.

For the latter, they have the advantage that people who start saving early do not have to save as much in general as people who start later.

Therefore, which approach is better?

Personal loan

Let’s take a look at both cases.

Suppose you are 20 years old right now. You want to have 2 million euros saved when your retirement age. Let’s say you want to retire at 65, so you have 45 years to save for your retirement, and you know an index fund that has an annualized return of 7.00%.

  • If you start investing at age 20 , you will have to save 510 euros per month to reach that goal.
  • If you start investing at 25 , you will have to save 725 euros per month to reach that goal, but you won’t have to save anything until then.
  • If you start investing at 30 , you will have to save 1,050 euros per month to reach that goal, but you won’t have to save anything until then.
  • If you start investing at age 35 , you will have to save 1,530 euros per month to reach that goal, but you won’t have to save anything until then.
  • If you start investing at 40 , you will have to save 2,270 euros per month to reach that goal, but you won’t have to save anything until then.
  • If you start investing at 45 , you will have to save 3,480 euros per month to reach that goal, but you won’t have to save anything until then.
  • If you start investing at 50 , you will have to save 5,600 euros per month to reach that goal, but you won’t have to save anything until then.

When reading those previous assumptions, you probably think that the amounts at an early age are more or less manageable, but that when you go forward, they almost scratch the impossible.

That is the lesson

Personal loan

You can give up your retirement savings for a few years, but catching up later can be incredibly complicated and the longer you wait, the worse it will be.

Therefore, my advice is to start saving for retirement right now, no matter how old you are. Even if you can’t save much, start with the amount you can save. Although it is small, it ends up making a difference . If you are not saving for your retirement, you have to be doing something more urgent financially with your money.

If you save 100 euros a month from 20 years in the same index fund as in the previous example, and then you increase the amount little by little, for example:

  • Increase to 200 euros per month at 30 years
  • You increase to 300 euros a month at 40
  • Increase to 400 euros per month at 50 years
  • Increase to 500 euros per month at 60

You will have 720,000 euros saved for retirement

Personal loan

Start saving for retirement now, even if it’s just a little. Do not hinder your future with impossible amounts of savings for your retirement, or depend on your employment until the end of your life.

Leave a Reply

Your email address will not be published. Required fields are marked *