Start Saving For Retirement

It's never too late or too early when it comes to saving for retirement but putting retirement savings off can be a costly mistake. Let's look at three examples*:

Jane Smith: A 50 year old woman and only now starting to seriously save for retirement. Single, no kids and with good current income, Jane enjoys a good lifestyle and figures she'll need $80,000 a year to live on when she retires in 17 years but thinks it's too late to start saving for retirement.

Assuming Jane will live to age 90, when she retires she'll need to have saved $710,000 in order to produce her target, annual income of $80,000. To reach that savings target by the time she retires, she'll have to save close to $17,000 a year. If Jane had started saving for retirement just five years earlier she could have reached that same retirement goal with just $10,000 in annual savings. While postponing her savings five years "cost" Jane an additional $7,000 a year to catch up her savings, if she waits another five years she'll need to save $33,000 a year to reach her target! Jane can probably stretch to afford the savings she needs if she starts now but if she waits, even just five years, it may be a different story

Bill Jones: A 40 year old with a family and not yet saving for retirement. Bill has had lots of important things to spend money on but nothing left over for his retirement savings so he is wondering if he could put off retirement savings for a few more years. Bill and his wife plan to retire when Bill turns 65 and expect they'll need $60,000 a year in income retirement and live for 30 years after they retire. To produce the targeted $60,000 a year in retirement income, the Joneses will need to have $565,000 saved by the time Bill turns 65. If he starts saving now he'll only need to save about $5,700 a year. Here's what he'll have to save annually if he waits.

Time Bill Waits to Save	Annual Savings Needed
3 years	$7,900
5 years	$9,900
10 years	$17,800

If Bill continues to wait, it will be a costly decision and require a much higher savings rate later unless he and his wife are willing to accept lower income when they retire.

Suzie Smart: A 30 year old woman who is just starting to save for retirement. Suzie is a single woman who dreams of retiring at age 60 with $50,000 of annual income. Although she can't afford to save very much now, she wonders if she should save something now anyway, even if it won't be enough to hit her savings goal.

Assuming Suzie lives to be 92, she'll need to have $476,000 in retirement savings to give her the retirement income she hopes for. If Suzie can manage to save just $2,000 a year for the next ten years and then $4,600 a year from then on until she retires, she will hit her target amount at retirement. If she saves nothing now and waits until 40 to start saving she'll need to save $8,300 every year. By starting now, even with only $2,000 a year, she'll be able to hit her savings goal with far less of an increase in savings later.

Whether you're a married or single, man or woman, saving for retirement is something you should start now. Don't get discouraged just because you're starting late or can't save that much right now. The key is to get started. The longer you wait the more it will cost you later. At Boulevard R, we believe that if you have a clear and actionable path to save for retirement, along with the support you need to get on track, you'll be well on your way.

* For the sake of simplicity in our examples we'll assume a 10% annual return on investments and keep everything in today's dollars.