When 4% is better than 44%.

When did you first start saving? Some people are much more disciplined and save from their very first dollar earned, others, not so much. With my own child, it has been a “do as I say, not as I have done” scenario. When I first started working, my family dynamics were different than for my daughter. I have insisted that she start depositing into her 401(k) from her first paycheck, which she has done. But what is the true cost of waiting?
If you start saving at 25 and plan to retire at 70, you’ll need to save just 4% of your income; meanwhile, if you start saving at 45 and plan to retire at 62, that percentage is 44%. The visualization uses data collected by the Center for Retirement Research at Boston College, which assumed you had a real rate of return of 4%, earned an average wage and were saving enough to replace 70% of your preretirement income in retirement (which includes Social Security benefits), among other assumptions.
By the way, if you’re thinking that barely anyone waits until their 40s or later to save for retirement, you’d be mistaken: Data show that more than 1 in 5 people don’t start saving until their 40s or older.
So take advantage of the biggest saving asset you have – time.


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