Money Talks, So Should You

Debt Destroyer: The cost of starting late with retirement saving

Natalie H.
by Natalie H. , Dimespring 30

Everyone knows you should start saving for retirement as soon as possible. It is fairly common knowledge that Social Security is not guaranteed, at least to the extent it is now. Pensions are no longer as widely offered as they once were and many people must now fund their own retirements. It is of vital importance that the average person makes an effort to start early. The most important to step is just starting the process.

Why bother, you may ask? It's too hard! I need money for other things! The truth is even putting aside a little money for retirement will be hugely beneficial down the line. Did you know that if you invested $200 a month at age 25 in a Roth IRA, you will have amassed almost half a million dollars (at 7 percent market interest) when you retire at the age of 65?  In this instance, compound interest is your best friend! It is the helping hand that will help you save for retirement even with small amounts of cash.

The main thing is that the earlier you start, the better your chances of amassing significant savings. If you invest in your 20s or earlier, you can put away a relatively smaller amount of money than someone in their 40s who needs to play catch-up to get to save the same amount of money.

READ: How do I start an Individual Retirement Account?

About half of America’s workers have a 401(k) or pension through their current employer. A Roth IRA is also a great savings vehicle as there are no taxes paid on the amount if withdrawn after the age of 59.5 years. This is because it is funded with money that has already been taxed. Another benefit of having a separate retirement account is that it sometimes helps to have something specifically created for long-term investment. That way you know that making a withdrawal in advance will be the same as taking money away from your future when you may need it most.

But why should you care about your retirement? The average Social Security benefit for a retired worker was $1,230 a month. If this is less than what you currently live on, then you NEED to prepare for the future.

READ: What is the annual cost of retirement?

As a more personal example, a good friend of mine has parents in their late 40s that are just now starting to put money away for retirement. As a result, they will most likely be painfully underfunded when it comes time to retire. She once said to me that she is now afraid that she will have to provide for them when they are too old to work anymore. She has also said that she is thinking one day that she might have to buy a home big enough for her family and parents to live in together.

I know personally that I would not want to be a burden to my family or anyone else for that matter. Most people I know don’t want to be in that boat either.

The truth is, being told to save for retirement is often not enough. Many people know what they must do, but many don’t. The best thing to do is start early as you can and invest in a Roth IRA for as little as $50 a month. Now is the time to take control of your future. This is important because no one else will do this for you in the end.

Natalie lives in the Southeast with her boyfriend, dog and her collection of vintage art posters. When she is not kicking debt in the face, she enjoys writing, dancing, jogging and reading about personal finance. Natalie is a member of the Dimespring 30, a community of bloggers sharing their thoughts, experiences and perspectives on personal finance.