When Should I Start Planning For Retirement

financially savvy kids

By K. Bridget Schneider, CFP®, CRPC®

planning for retirement

When you’re in your 20s, 30s, or even your 40s, retirement seems so far away.  Planning for it may not be at the top of your “To-Do” list.  But when should you start planning for retirement?  Now is the best time!  It’s never too early to start planning for retirement, and the earlier you start, the easier it may be. 

You don’t need to be able to envision every detail of what your retirement will look like to start laying the groundwork for your plan.  Here are some tips you can put into place – even if retirement seems light-years away.

Use Time Wisely

When you start planning for retirement in your 20s you have a lot of time to develop good savings habits and you can take advantage of saving a smaller amount over a longer period.  However, according to research done by Morning Consult, even though 49% of those surveyed said saving for retirement should start in your 20s, not all follow that advice.  26% wait until their 30s, 15% wait until their 40s, and 8% wait to start saving for retirement until after age 50.  Waiting to plan and save for retirement may increase the odds that you won’t be able to continue the lifestyle you are used to because there is less time to accumulate what you will need.

Take Advantage of Compounding

Compounding occurs when the earnings on your investment are added to your principal, creating a larger amount on which to generate earnings.  And compounding can turn a small amount into millions over time.   Consider this example.  

Let’s assume a 25-year-old saves $100 every month for 40 years.  That’s a total of $48,000 saved by age 65.  If earnings are 10% annually and allowed to compound, after 40 years the value would be $632,408.

Now consider a 50-year-old who decided to wait on planning for retirement until they felt they could afford it.  To catch-up, they save $1000 per month for the next 15 years.  That is a total of $180,000 saved by age 65.  However, after compounding at 10% for 15 years, the total value is $414,470 – far less than our early saver.

Of course, it’s not likely that an investment will provide a 10% return every year, but the point is that it’s easier to save a smaller amount and grow your money over 40 years than over 15.  In an account that is either invested or accruing interest, having more time to let the money grow could mean doubling, tripling, or even quadrupling your savings.

Take Advantage of Resources

Saving for retirement without knowing how much you need to fund it is like going on vacation without planning the trip – you might see some nice things, but you may miss the great things your vacation spot is known for.  There are many resources available to help you develop your retirement plan.  For instance, you can visit Get A Financial Plan or check out this calculator to determine how much you should be saving to meet your goal.

It’s important to start developing good savings habits.  Even if you can only save a little now because of a limited income, that’s okay.  But as your income grows, your savings should increase too.  Make sure you’re enrolled in your employer’s retirement plan if one is offered and contribute enough to get any employer matching amount.  You may also consider opening a Roth IRA.  Making regular contributions to this type of account can provide tax-free income in retirement. 

Many seem to understand the importance of planning for retirement.  However, more than one-third of those surveyed say they’re either overwhelmed by the process or don’t understand the investments and resources available to them.  If this describes you, you may find value in talking with a Financial Advisor or Certified Financial Planner™ professional.  We can provide advice on the type of account, an amount to invest, and possible investments to meet your goals.


If you don’t have a retirement plan, now is a good time to put one together.  No matter how near you are to retirement or how much you need to save to fund it, we can share tips that fit your unique circumstances.  We offer guidance on saving and investing that will help you retire the way you want.  Visit our website today or call us at 217-605-8130.  Our mission is to help you make more informed decisions to better your financial position and reduce your financial stress.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual, nor intended to be a substitute for specific individualized tax or legal advice.  The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.

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