Here are five reasons why you should start saving for retirement in your 20s.
But as my husband and I have repeatedly pointed out to our daughter, her pension may not be enough since it’s determined by a formula based on her years of experience and final salary. And who knows what the rules will be for Social Security by the time she can collect benefits?So, we keep pressing her to start saving for retirement in her 20s. Here are five reasons she should start now.Melody Evans, a wealth management adviser at TIAA, crunched some numbers.
for the rest, the Internal Revenue Service would take $4,580 a year. That would leave you with take-home pay of $35,420, or $681.15 a week. However, since the $1,800 is tax-deferred, the IRS would tax $38,200 — not $40,000. That means the IRS gets $4,364 and leaves you with $33,836 — a weekly salary of $650.69.
Historically, time is on investors’ side: Let’s say that in 2002, a 25-year-old started investing that $3,600 a year in the S&P 500 and stayed at just that amount for the next two decades. At the end of 2022, the investment would be worth close to $180,000. “It’s common for young people to wait for a point when they will start saving, and that’s going to be when they’re more established in their careers and they have extra to save,” Evans said. “But just like you automatically deduct money to pay for your utilities and your cable bill, consider automatically deducting money from your paychecks and use it to build your retirement savings.”If you wait to save whatever is left over, you might never get started, she warns.