People stumble with their retirement savings at all stages of life as competing interests — student loans, the cost of having children, health emergencies and home obligations manage to get in the way. But the cost of putting off saving can be dire: Roughly 40 percent of baby boomers and Generation Xers risk running out of money in retirement, according to the Employee Benefit Research Institute.
Some young workers may think it’s smarter to use their meager paychecks to aggressively pay off student loan debt before they start saving for a phase of their life that’s still decades away. But that would mean giving up the biggest advantage they have when it comes to saving for retirement: time. If you start saving at 22 you need to save half as much on a yearly basis as you would if you started at 32 to get to the same dollar amount.[1]
Workers who receive matching contributions from employers should at least save enough of their income to take advantage of that match. They should also set the plan to automatically increase the contribution rate by 1 percentage point each year until they are contributing at least 10 percent.[2] If the plan doesn’t allow for automatic increases, workers should increase their savings rate every time they get a pay raise, he says.
Examples are for Informational purposes only, and should not be considered investment advice, a recommendation of the advisor's services or abilities, nor indicate a favorable client experience. Individual results will vary. Investing involves risk and you may incur a profit or loss regardless of strategy selected.
1. Raymond James, WorthWhile Magazine, Spring 2014
2. CNBC.com, How to Avoid Outliving Your Retirement Nest Egg, February, 23, 2014
3. The Washington Post, Retirement Mistakes People Make at Every Age, August, 25, 2014
