The younger a person is when they start saving and investing, the more money they’ll accumulate by retirement age. Yet “If I knew then what I know now”, an expression used in countless songs, books, and articles about personal growth and lessons learned, has been uttered by investors who didn’t begin saving towards retirement until after the age of 28.

According to a Gallup Poll only 1 in 4 investors started saving at a young age. And by young they mean under the age of 25. The College Investor published an article encouraging young 20-somethings to start investing that included a chart depicting yearly investment amounts needed to reach 1 million dollars by age 62, for ages 22 to 29, assuming an 8% average annual return. A 22-year-old would only need to invest $3600 per year whereas a 29-year-old would need to invest $6400 yearly. 

Anyone over the age of 18 can open a brokerage, retirement, or other investment account like an HSA. And one of the easiest ways to begin investing is through an employer-sponsored retirement plan. These plans come with tax advantages and often matching contributions. Essentially, free money. Even better, your money will be taken out of your pay before taxes, so you won’t even notice. For example, 10% of your pay before taxes will barely make a dent in your take home amount.

In addition to having a 401k or IRA, it’s important to have an emergency fund that can cover 3 to 6 months’ worth of expenses in the event of job loss or illness. That’s why it’s important to keep your debt-to-income ratio low as you graduate college and enter the workforce. If you have too many bills and not enough income, you’ll struggle to save and invest. 

Contact our experts for Retirement Planning services and Investment Management principals and strategies that can help you live the life you want to live now, while saving towards the retirement of your dreams.