When Should You Start Saving for Retirement?

The two most important requirements for major success are: first, being in the right place at the right time, and second, doing something about it. -- RayKroc, founder of McDonald's

Mr. Kroc was right. If you want financial security in your future, you need to start saving for retirement at the right time -- which is as soon as possible. The more you save, the bigger your withdrawals will be.

Image source: Getty Images.

Many people are not saving aggressively for their retirement, assuming incorrectly that it's too early or too late to do so. Let's take a look at both of those arguments and then review just what you can achieve. (Want to retire early? It might be more within your grasp than you think.)

It's not too late to be saving for retirement

It's easy to assume that there's little point in saving for retirement if it's only a few years away and you haven't got much socked away and you're counting on Social Security. Go ahead and count on some Social Security income in your retirement, but it may be less than you expect, and it probably won't be enough to support you.

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The average monthly Social Security retirement benefit was recently$1,364, which amounts to $16,368 per year. If your earnings have been above average, you'll collect more than that -- up to the maximummonthly Social Security benefit of $2,687 for those retiring at their full retirement age. (That's about $32,000 for the whole year.) See? It's not exactly a king's ransom. You can get a sense of how much to expect from Social Security via the Social Security Administration's online Retirement Estimator tool, and you can get an even clearer idea of your expected benefits by setting up a my Social Security account with the SSA.

Or maybe you're counting working as long as you can or holding a part-time job in retirement to supplement your Social Security with additional retirement income? That's a reasonable plan -- except that life's curveballs may get in the way. Accordingto the 2017 Retirement Confidence Survey, 48% of retirees left the workplace sooner than they had planned to -- with 41% of them doing so because of health problems or disability, 26% citing company downsizings or closures, and 14% having to care for a spouse or other family member.

A better plan is to save aggressively beginning right now. Here's how much you might amass over several relatively brief time periods if your money grows by an annual average of 8%:

Growing at 8% for

$10,000 invested annually

$15,000 invested annually

$20,000 invested annually

3 years




5 years




10 years




12 years




15 years




Calculations by author.

See? Even if you're only five years from retiring, you might be able to accumulate close to $100,000 if you (and perhaps your spouse) can manage annual investments of $15,000. (Note, of course, that while the stock market has averaged annual returns close to 10% over long periods, it can be quite volatile in shorter periods. You might average returns not of 8% but of 5% or even 15%. If interest rates were higher, you might accomplish more with bonds or savings accounts.

There are handy calculators online that can help with your retirement planning -- like this one, that shows you how much more you could accumulate by retirement by starting to save and invest now instead of later.

* Calculator is for estimation purposes only, and is not financial planning or advice. As with any tool, it is only as accurate as the assumptions it makes and the data it has, and should not be relied on as a substitute for a financial advisor or a tax professional.

It's not too early to be saving for retirement

Meanwhile, accordingto a GenForward poll by the Black Youth Project at the University of Chicago with the Associated Press-NORC Center for Public Affairs Research, more than 40% of Americans aged 25 to 30 have no retirement savings at all. Many of them may see little wrong with that -- after all, if you're 30, you probably have more than 30 years left before you retire. What's the rush?

That's very flawed reasoning, though, for several reasons. For starters, the more time your invested dollars have to grow, the more powerfully they can grow. Also, if you start young and are effective, you may be able to retire early! Check out the table below, which shows how much you might amass over several long periods with relatively modest investments if your money grows by an annual average of 8%:

Growing at 8% for

$5,000 invested annually

$10,000 invested annually

$15,000 invested annually

20 years




25 years



$1.2 million

30 years


$1.2 million

$1.8 million

35 years


$1.9 million

$2.8 million

40 years

$1.4 million

$2.8 million

$4.2 million

Calculations by author.

If you're young, the table above can give you an idea of how early you might be able to retire. For example, if you're 30 now and can sock away $10,000 per year, you might have accumulated $1.2 million by the time you're 60 -- two full years before you're even eligible to start collecting Social Security. If you apply the 4% rule to that nest egg, it suggests that you can draw $48,000 from it in your first year of retirement.

Image source: Getty Images.

Great wealth or early retirement are possible

The bottom line is that it's rarely too early or too late to start socking away money for retirement. The more you can save, the better -- and the earlier, the better, too, in order to give your dollars as much time as possible to grow. How should you invest your money? Well, if you expect to need it within five or perhaps even 10 years, don't keep it in stocks, as the stock market can be volatile over short periods. With long-term dollars, it's hard to beat stocks. You might simply use an inexpensive, broad-market index fund such as the SPDR S&P 500 ETF (NYSEMKT: SPY), which distributes your assets across 80% of the U.S. stock market and requires little expertise or oversight.

No matter how old you are, you can take steps today to make your financial future more secure.

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Selena Maranjian has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.