Is 30 Years Old Too Early To Start Saving for Retirement?

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Most 30 year olds haven’t saved much for retirement yet. Learn if you should start saving for retirement at this age or if you can wait until you’re older. [[{“value”:”

If you’re 30 years old, you might wonder if it’s worthwhile to start saving for retirement. Retirement is still decades away, and maybe it’s not a big concern among people you know. That’s the case with most young adults. The average retirement savings for Americans under 35 is $18,800, according to Federal Reserve data.

It’s tempting to spend your money elsewhere instead of investing in stocks so you can retire one day. But if you’re thinking of waiting, you should probably reconsider.

30 years old is a great age to start saving for retirement

It’s never too early to start saving for retirement. That may sound cliche, but it’s the truth. The younger you are when you get started, the easier it is to save, because your money has more time to grow.

At 30 or thereabouts, you’re still pretty young. You have the perfect opportunity to start saving, without needing to put in a lot of money every month. If you wait until you’re 40 or 50, it will be much more expensive to build your retirement savings.

Imagine you want to retire at 65 with $1.5 million. We’ll assume you invest your money and get a 10% return. That’s the average long-term return of the S&P 500 going back over 50 years. The table below shows how much you’d need to invest per month, depending on how old you are when you start. It also shows how much you’d end up investing total in each scenario.

You need to put in much more money, both per month and overall, if you start saving later in life. It’s in your best interest to save for retirement as early as possible.

How to start building your retirement savings

The best way to get started with your retirement savings is through tax-advantaged accounts. One option, if your employer offers it, is a 401(k) plan. You can set this up and have contributions taken directly from your paychecks.

Individual retirement accounts (IRAs) are another option. These are available for almost any individual, and you open them on your own through a stock broker. The value of 401(k)s and IRAs is that they save you money on taxes.

With traditional plans, your contributions are tax-deductible. There are also Roth 401(k)s and Roth IRAs, where contributions aren’t tax-deductible, but withdrawals in retirement are tax-free.

Once you’re contributing to a 401(k), IRA, or both, you also need to choose investments. Target-date funds are a simple, effective option. These do all the work for you — the fund will choose investments based on when you want to retire. For example, if you want to retire in 2060, you’d invest in a 2060 target-date fund, and you’re done.

Or, you could invest in index funds that follow the stock market. S&P 500 index funds are a popular choice. At age 30, a stock-heavy portfolio isn’t an issue. You’ll maximize growth, and you’ll have plenty of time to ride out any down periods in the stock market.

Getting started is more important than how much you save

The example from earlier showed how you could save $1.5 million by investing $461 per month. If you don’t have $461 per month to invest, don’t worry. You can start saving for retirement with any amount. It could be $25, $50, or $100 — whatever works for you.

What’s important is getting into the habit of saving for retirement. It doesn’t need to be a huge amount of money. As you get older, your income will probably increase, which will allow you to invest more. But it’s good to get the ball rolling on your retirement savings as soon as possible. In 10 years’ time, you’ll be happy that you started now.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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