Save Early, Save Often

You have heard the standard retirement investing advice before: start saving early and save often. It is advice that I have given my clients over the years when they are first starting out on their own. I have had the opportunity to see how many of those clients who took my advice fared over the past fifteen years, especially during the recent recession. Having a large and growing retirement savings plan allowed them to remain calm when markets tanked, knowing that they could ride out the storm and that their funds still had lots of time to recover and flourish before they needed the money in retirement.

There are many reasons to set up a regular retirement savings plan in your twenties:

1. Company pension plans are disappearing

The days of the gilt-edged pension plans that took care of you for life after retirement are all but gone. As companies tighten their belts, fewer are offering pension plans at all and many are converting to defined contribution plans which do not guarantee you a level amount after retirement. Taking your retirement planning into your own hands is more important than ever.

2. More college graduates are choosing self-employment

Small business startups are booming in light of the tight job market. Small business owners need to set up a regular retirement savings plan right from the start or risk putting it off until it becomes an even larger effort.

3. The time value of money allows for significant compounding of contributions

Allowing retirement income to grow and compound over decades is the easiest and most effortless way to build wealth. Retirement accounts like IRAs also allow the income to build either tax-deferred or tax-free which allows the income to grow unfettered.

4. The earlier you start saving, the less you have to save overall

Starting to save for your retirement in your twenties is much easier than in your fifties, when the time frame is much shorter and larger amounts have to be socked away to meet your retirement goals. Small contributions made early can grow substantially over time and ensure that you have enough money to live comfortably in your golden years.

5. People are living longer than ever before

The average lifespan of Americans is 80.8 years for women and 75.6 years for men, much higher than when your parents were saving for their retirement. With retirement plans being required to fund longer lifespans, an early start is critical.

Retirement may be the last thing on your mind when you first start out in the working world. Tucking small amounts of money away monthly, however, will give you financial security for the rest of your life.