Money Talks, So Should You

Q&A: When should I start budgeting for retirement?

Mechel Glass
by Mechel Glass, Dimespring Contributor  (@CredAbility)

I can’t emphasize strongly enough how important it is to begin saving for your retirement at the earliest possible age.

The sooner you begin saving, the more time your money will have to grow and give you the cushion you need to afford to retire.

Why do I advocate saving for retirement  so soon? It’s because most people will never experience the benefits of a pension or lifetime health coverage enjoyed by those of the previous generation.

So it’s important to begin saving for your retirement as soon as you begin to earn a steady income.

READ: Five retirement strategies to start now

For anyone who is 40 and older, it’s an easy decision to invest a large percentage of your paycheck in a 401(k) or other retirement account.

But for people in their 20s and 30s – and even the 18-year-old who gets their first job out of high school – it is important to begin to set aside even a small percentage of your pay as soon as you can.

I was fortunate to work for a Fortune 500 company during my 20s and I took full advantage of its 401(k) retirement savings plan. I admit that I was well positioned to make the most of this situation.

I didn’t have a lot of debt and I was earning a good salary. In addition to saving enough money for a down payment on a house, I socked away 15% into my retirement account year after year.

The company also matched a percentage of my contributions – which is free money and another reason to save as soon as you can.

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My decision to save for retirement at an early age has provided significant benefits already.

By the time I reached my mid-30s, I was in control of my financial life. I worked for the company for several years and by the time I moved on to my next job, I had a solid nest egg at a young age.

Of course, many people have student loans or other debt and may not have the option of contributing to their retirement account right out of school. If you are drowning in debt, focus on paying down those loans.

Once that debt is under control, begin building an emergency fund to cover three months of expenses, including rent, food, utilities and other essential costs.

Once you have set aside money for an emergency, begin to invest one percent of your paycheck into your retirement savings account. As your debt continues to decrease, gradually increase the percentage of your pay that you contribute to retirement.

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For people who own small businesses or may have children who earn outside income, it’s never too early to set up a retirement fund.

Small business owners cannot only save for their retirement, but can earn a credit on their federal income tax by making annual contributions to an Individual Retirement Account.

For parents who have children that earn outside income, check with your accountant to determine the best way to set up a retirement account for them.

It is unusual, but I have a few friends with children who earn money modeling or from small parts in movies. Since most child actors and models won’t make a career from this work, it’s wise to invest this money for your child’s future.

Related video

Anchor of CNBC's "Closing Bell" & author Maria Bartiromo talks about the reasons why age should not be a deterrent when it comes to getting a 401(k).


Mechel Glass is vice president of community outreach for CredAbility. She is responsible for coordinating community outreach and financial education activities across the agency’s regions and developing new education programs for both classroom settings and online. Glass, a U.S. Army veteran, is also co-author of “The Veteran’s Money Book,” scheduled for publication in April 2014 by Career Press. The book can now be ordered on