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When to Start Saving for Retirement (+ Best Options)

Entering your career can be an exciting time, but it can also be stressful. Often, you still have student loans to pay off, rent or mortgage, car loan, and other expenses when just getting on your feet.

It may seem an odd time to start planning for the end of your career. However, retirement planning should begin as soon as you start earning paychecks.

When you get hired by a company that offers a 401k, such as a sentry 401k, or another investment package, you need to take advantage. Even if you’re self-employed or work in a small business without benefits, start a portfolio.

Here’s why you need to save for retirement immediately. Read on to find out what options to look into to start padding that nest egg.

Why Save Early

If you’re asking yourself when you should start saving, the answer is now. Hopefully, you’re reading this early enough to maximize your savings. Make your money work for you.

Gaining Interest

Saving for retirement has to start early because compound interest can make the most of what you have. Interest is the percentage your investment makes in a set time. Compound interest takes the money you save plus its earned interest and then earns more interest based on the new total every period.

The long-term point of interest is that your money earns money without you having to work for it. That’s how your money can go to work for you.

Now, there are other ways to turn a profit by investing. But people tend to lean on more stable growth for retirement, hence, the emphasis on interest when saving for the future.

Starting Good Habits

Another reason to start saving as soon as possible is that it will start healthy habits in your life. The mental benefits of delayed gratification are astounding.

The sooner you get a good habit started, the better for your mental and financial health. By setting up auto-deposit into your retirement accounts, you don’t view that money as take home. This makes it easier to plan other financial goals without looking at retirement contributions as an income drain.

Financial Security

There are many motivations for earning money, getting things, going on family vacations, and earning status. But one genuinely rewarding goal for earning money is financial freedom.

Financial freedom is a stage where someone can meet all financial obligations without relying on a paycheck. Essentially, that’s what retirement is supposed to be. Unfortunately, that goal seems less and less attainable. But with financial discipline early, it’s still possible.

How to Start Saving

Talking about saving is great, but too many people believe you have to already have money to make money. Sure, that makes things easier, but pinching pennies to free up some for saving is doable by anyone.

Set Goals

If you shift your perspective on money and start looking at each penny as an opportunity that you choose to use, you can make some goals.

Making goals can be as simple as paying off debt, to saving for a car. But make sure in your goal setting you have retirement set in ink.

Budget For It

Once you set your goals, you can view each dollar as a worker towards those goals. A straightforward way to start is to make a budget on your current income, then as your pay increases in your career, use the extra income strictly for saving and investing.

Try to live off your initial budget as long as possible. If you skrimp now and invest as much as possible, your money will have enough time to earn some serious growth in the long run.

Max Out Work Contributions

What’s better than free money? And yet plenty of people opt to forego this route when starting at a company with benefits. Many employers offer to match employee contributions to a retirement investment plan up to a certain percentage.

It is important to set that percentage as an automatic contribution from your paycheck so that your employer will also contribute that amount. This money is yours for the taking, but you have to commit to setting aside that portion of your income.

Ways To Invest for Retirement

Starting with typical employer options, let’s look at some common starting points for retirement savings.

401(k) or 403(b)

The most common employer-offered retirement plan is the 401(k) or 403(b). Which opportunity is offered usually depends on the type of employer. For-profit businesses offer 401(k) plans, and nonprofits tend to provide 403(b)s.

Both are diverse portfolios of stocks, mutual funds, bonds, and securities. These tend to be low risk since the goal is growth over a long time. Most of these plans are also tax-deferred, meaning your contributions are not taxed. However, the tax will hit you when you disburse your accounts.

It’s important to know that some companies require a set period of employment before you are considered “fully vested.” This means that your employer’s portion of your investment isn’t yours until you’ve put in the required time.


An IRA is an individual retirement account. It allows you to contribute money up to an annual limit. This is money you choose to invest independently from employment benefits.

An IRA is made up of diverse investment options that fit your risk tolerance and goals for growth. Contributions are either pre-tax or post-tax.

Traditional IRA

You contribute to traditional IRAs with pre-taxed income. This means the chunk you invest in this account won’t count toward your income. As such, you can claim them on your taxes.

Withdrawing money from your IRA then becomes taxable income for that tax year. Taxes are a strong motivating factor for whether or not a person chooses to invest in a traditional or Roth IRA.

If you ride your tax bracket line, you might choose to invest in a traditional. This allows your income to stay below the line instead of bumping you into a higher tax bracket.

There are no income limits to participating in a traditional IRA. But there is a time limit on traditional IRAs. You must begin disbursing your accounts starting at age 70. This is not the case if you are still employed, though.

Roth IRA

Your contributions to Roth IRA come from your post-taxed income. Because of this, the IRS looks at that money (including interest) as already taxed. So withdrawals from your Roth IRA are not viewed as taxable income.

Any interest or capital gains your portfolio accrues are not taxed. Instead, the only money taxed is what you pay on your income tax before you invest those funds. Many people view Roth IRAs as more desirable than traditional IRAs because of the tax advantage.

There are income limits on who can contribute to a Roth IRA. As is typical with many financial rules, there are loopholes to get around these limits. It’s best to meet with a certified financial advisor to navigate this and ensure you follow the proper channels.

There is no time limit on Roth IRAs as long as you live. But there are some rules for early withdrawal. Any already-taxed income you contribute to your Roth IRA can be withdrawn untaxed. However, there may be penalties associated with early withdrawals in relation to your age, years contributing, and type of funds withdrawn.

The Bottom Line

The most important part about saving for retirement is that you start as soon as possible. Start small, if you must, but remember, the more you invest earlier, the greater the growth potential.

You may be more concerned about personal security or cybersecurity than financial security at this stage in life, but take a second look at your goals for the future now. If you feel like you’re spinning your tires or don’t know how to take the first step, set up an appointment with a financial advisor.

Maria Hanson writes and researches for the insurance comparison site, She is passionate about helping workers start saving for retirement as early as possible to ensure they make the most of their money. 

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