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Investor's Perspective: When Should I Start Saving for Retirement?

Updated: Jan 13, 2020

The simple answer to this question is "as soon as you can." Preferably you should start saving for retirement in your twenties, as soon as you start receiving regular paychecks. Even with that said, it is never too late to start saving for an abundant life of retirement, therefore the time to get started is now!

The fundamental reason behind this ideology is that the sooner you start saving the more time your money has to grow. Now let's focus in on the latter part of that last statement; the more time your money has to grow.

My philosophy is to never save your money just for the sake of saving it, rather you should save your money for the purpose of investing; "SAVE TO INVEST." Your money will not grow unless you do so. Allowing all of your hard-earned money to just sit in a savings account will not do you much good. Your money must be invested in order to take advantage of this wonderful thing called compound interest. Compound interest, in a sense, is the process of multiplying your money.

For example, let's say that you purchase $10,000 worth of preferred stock in a manufacturing company that pays an annual dividend of 8%. Compound interest will look like this...

Year 1: $10,000 + 8% (8% of 10,000 = 800) = $10,800

Year 2: $10,800 + 8% (8% of 10,800 = 864) = $11,664

Year 3: $11,664 + 8% (8% of 11,664 = 933.12) = $12,597.12

Fast forward 20 years from the date of your initial investment and your $10,000 will have grown to 46,610. Now, of course, there is no such thing as a guaranteed investment. Every investment comes with some degree of risk. If a financial advisor ever uses the word guaranteed returns you should run the opposite direction as fast as you can!

Nonetheless, invested dollars versus dollars just sitting in a savings account is well worth the risk so long as the investment aligns with your financial status, risk tolerance, and financial objectives. Being solely dependent on a 401k, pension plans (almost nonexistent), and social security(which are also disappearing) is not enough anymore.

People are also starting to live longer with medical advances, therefore your money will have to stretch even farther into retirement, otherwise, you will be forced to get back into the job hunt to make ends meet, which will be no fun. The industrial revolution days of working hard for 30 years and then retiring on a cushy pension plan are long gone.

The bottom line is that the time to start saving for retirement is now. Furthermore, it is extremely important that you actually review the progress of your retirement plan on an ongoing regular basis.

Take charge of your wealth!

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Disclaimer: Hudson Wealth Management, LLC (HWM) is a FINRA registered investment adviser firm. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Before investing, consider your investment objectives and HWM's fee schedule. The information provided herein is for illustrative purposes only and does not constitute personalized investment advice, recommendations or solicitations to hold, buy or sell any investment or security of any kind. All images and return figures shown are for illustrative purposes only and are not actual customer or model returns. Past performance does not guarantee future results.

- Financial Advisor - Comprehensive Financial Planning - Wealth Manager - Retirement Planning - Estate Planning - Investment Portfolio Manager

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