You might not like our answer here, but the best time to start saving for retirement was probably yesterday.
Funding your life for some 30 years from just savings and investments, without other supplementary income, is no small feat. And the earlier you can get going on your big pile of cash, the better.
Another key reason to start saving early: compounding interest. This means that if you’re earning interest on your nest egg, that money is then added back on top of your deposit, and you then earn interest on the “new” total.
When it comes to investing for retirement, there’s another reason to start early: Your goals, time horizon, and risk tolerance will look rather different when you’re young.
If you have a long way to go until retirement, you might consider riskier assets, such as stocks, in your investment portfolio. Meanwhile, people closer to retirement age tend to be more conservative in their choices, and allocate their portfolios to less risky assets, such as bonds, that also tend to yield less.
The Key to Saving — Do It When you Don’t Notice
Putting money away every month can be hard. And retirement’s time horizon decades away, isn’t making it easier. That’s why baking your savings into your regular financial planning can be helpful.
You broadly know your income, even if it fluctuates. Can you automate your savings in a way that minimizes the pain of seeing a big chunk of your paycheck going into the retirement piggy bank?
This might already be the case if you’re taking advantage of an employer-sponsored retirement plan, such as a 401(k), which lets you pick a monthly contribution.
Also consider adding a set amount to your cash savings stash when you receive your paycheck, the idea being that you can’t spend what you can’t see. Make your money work for you and consider a high-yield savings account. It can help you save up for big expenses in the near-term, and help you get closer to the maximum for your retirement contributions every year.
Check out SoFi’s high-yield savings accounts, and get going on your savings goals.
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