This Is The Age You Should Really Start Saving For Retirement

As financial planners advise, it's never too late to start saving for retirement. If you haven't saved a dime yet, that's fine; whatever age you are right now, is the age you should begin. However, if you could go back in time, the age you should start to save would be the age you are when you get your first job. Per investment company Vanguard, you should begin investing in retirement "as soon as you begin working." This said, the target age many experts would point to is 25. If you were to start saving for retirement at this age — putting away 15% of every paycheck — you could, potentially, reach $1 million by the time you retire.

This all, of course, depends on your salary and the rate of return on your retirement plan, but the bottom line is that you'll reach your retirement goals more easily if you start saving early — and age 25 gives you about 40 years of saving and earning compound interest. Compound interest (that is, interest earned on interest), is the true key to seeing your savings grow for your future.

As Berkshire Hathaway's Charlie Munger once said about compound interest: "Never interrupt it unnecessarily." So, if we apply this wisdom on exponential growth to retirement savings, the longer you can save, the better, which means starting earlier than later. Let's crunch some numbers with Investor.gov's compound interest calculator.

Consider a scenario where two people both save $150 a month until age 67; however, one person begins at age 25, and the other starts at age 35. Both retirement plans have a 5% rate of return. Fast forward to age 67, and the first person now has $243,417.15 in their retirement account, while the second person has $135,537.89, or 44.3% less.

What's more, the person who started saving for retirement at 25 put $75,600 into their retirement account, while the person who started at 35 contributed $57,600. That's only an $18,000 difference, yet the difference in retirement savings was $107,879.26. The result of 42 years of uninterrupted compound interest versus 32.

As the Social Security Administration notes, financial advisers recommend having 70% of pre-retirement income in retirement. When calculating this fixed income, you need to consider your Social Security benefits, along with your retirement plans/investments and personal savings. So, figuring out how much you need to retire and live comfortably by age 67 can help you know how much you need to save, to go along with your Social Security, especially if you get a later start.

In a 2023 Bankrate survey on financial regrets in America, 74% of respondents said that they did have a regret, with "not saving early enough for retirement" the top vote-getter with 21% of survey answers. But while this may be regrettable, it's best to learn from it, rather than "compound" it by not starting to save in the now. While the ideal age to start saving for retirement is 25 (as it just makes reaching your goals so much easier), it's never too late to begin.

At age 35, 45, 50, you can still make a significant contribution to your retirement income. What's more, you're likely earning more at this point of your career. Per the U.S. Bureau of Labor Statistics, a person earns the most between ages 35 and 54. So if you put away 15% (at least) of your income, you should start to see positive results more quickly.

This said, if you start to save for retirement at a later age, and because you're likely earning more than when you were younger, it's a good idea to save more of your income, if possible. According to Fidelity Investments, while 15% of one's income works if you start saving at age 25, the brokerage firm recommends increasing this percentage for every five years after. That is, 18% at age 30 and 23% at age 35, and so on.