Maybe you took on too much house. Maybe you racked up debt that cost you lots of money in interest. Or maybe you simply neglected your savings, and lost out on years of compounding that could’ve grown your money into a larger sum.
It’s the latter that Americans are most likely to kick themselves over. In fact, in a new survey by New York Life, the No. 1 financial regret cited among U.S. adults is not saving for retirement. Not only that, but it took those surveyed an average of 11 years to recover from that mistake — perhaps by ramping up their retirement plan contributions or taking other steps to make up for lost time.
If you’ve yet to begin building a nest egg, it’s imperative that you recognize the importance of starting one immediately. Otherwise, you’ll risk falling short when your golden years roll around.
You Need Savings Of Your Own
Many workers neglect their retirement savings because their income is monopolized by near-term expenses. For others, that neglect can stem from an overreliance on Social Security. Both scenarios, however, are problematic — namely because Social Security is only designed to replace about 40% of the average earner’s pre-retirement income, and most seniors need close to double that amount to live comfortably. Throw in rising senior healthcare costs, and it’s clear that neglecting your nest egg is apt to result in a world of regret.
A better bet? Start funding a retirement plan now, no matter how old you are or how much you earn. It’s never too soon to begin saving for your golden years, and the earlier in life you start, the more opportunity you’ll give your savings to grow.
Currently, you can contribute up to $19,000 a year to a 401(k) plan if you’re under 50, or up to $25,000 if you’re 50 or older. If you don’t have access to a 401(k), you can save in an IRA. The current annual limits for IRAs are $6,000 for workers under 50, and $7,000 for those 50 and older.
But you don’t need to max out your 401(k) or IRA to build a substantial pile of savings. In fact, if you’re on the younger side earning an entry-level salary, or you have lots of bills, you probably can’t max out. But if you save consistently over a long period of time, you’re bound to amass a sizable fortune for retirement.
Check out the following table, which further illustrates this point:
|Start Saving $250 a Month at Age
|You’ll Have This Balance by Age 67 With an Average Annual 7% Return
These are some pretty impressive numbers, but they’re also relatively attainable — provided you don’t put off your retirement savings for too long. And if you’re wondering about the 7% return used above, it’s actually a couple of percentage points below the stock market’s average, which means it’s a reasonable assumption to work with when we talk about saving and investing over multiple decades. Of course, if you invest your savings more conservatively, you’re apt to see a lower return. The point, however, is that it’s possible to build quite a bit of wealth without sacrificing a ton of money each month, provided you start early.
It’s hard to got through life without any regrets, but don’t let yours stem from a lack of action on the retirement savings front. If you don’t make an effort to sock away money for the future, you’ll risk struggling financially during your golden years, and that’s a fate you don’t want to sentence yourself to.