Save and Invest

This is when people start saving for retirement—and when they actually should


A significant portion of U.S. adults are delaying starting to save for retirement until a decade or more into their working career — far later than what financial experts advise.

Just 39% of adults who are saving for retirement started in their 20s, according to a recent report from Morning Consult, despite half of respondents saying that people should start saving during those years. Just over a quarter of Americans began saving in their 30s, 15% in their 40s and 6% in their 50s.

Plus, half of adults between 18 and 34 are not saving for retirement at all, compared to 42% of adults aged 35 to 44, and 40% aged 45 to 64.

Not starting early can impede or complicate your ability to build up an adequate retirement account, which Americans think should be at least $1.7 million at age 65, according to a recent survey from Charles Schwab, which looked at 1,000 401(k) plan participants across the nation. Here's why.

When to start investing for retirement

Financial experts advise everyone to start saving and investing for retirement as soon as they can, ideally putting away at least 10% of your income each month. That way, your retirement funds have time to recover from any dips in the market and benefit from compound interest, which is when you earn returns on investments, as well as returns on those returns. This helps money grow at a faster rate than with simple interest.

To hit $1.7 million by 65, you would need to save $486.97 per month starting at age 25, assuming an 8% rate of return, CNBC Make It previously reported.

But if you waited a few years and started saving at 30, you'd need to contribute $741.10 per month to reach the same goal with an 8% rate of return. Starting early eases the savings burden significantly.

The definitive guide to retirement savings plans
The definitive guide to retirement savings plans

If you can't afford to invest hundreds of dollars a month at the beginning of your career, start with as much as you are able to, even if it's just $10 or $20 per month, experts say. If you increase your contributions gradually, you'll still be able to build a healthy retirement account.

"If you spend the first half of your career not saving, you've got to do a lot of catching up later in your career, and you don't have the time in the market to ride out any fluctuations," Katie Taylor, vice president of thought leadership at Fidelity Investments, told CNBC Make It. "It's always a good idea to get started as early as possible."

How to start saving for retirement

While it's ideal to start saving early, the next best time to invest for retirement is right now. Set up whatever auto-contribution you can afford today and take a look at your budget to see if there's anywhere you can cut costs to save more.

If your employer offers a 401(k) plan, that's the smartest place to start investing because of the tax benefits, experts say. The contribution limit is $19,000 for 2019, but if that is more than you can put away, contribute at least up to the employer match.

"If there is a match that's 3%, make sure that you're saving at least 3%," Taylor said. "Otherwise, you're leaving free money on the table."

Nearly 20% of savers do not contribute up to the match, a recent report found, which is akin to taking a pay cut from your employer. After all, your 401(k) match is part of your overall compensation. The average employer 401(k) match is 4.7% this year, according to Fidelity.

You can also open a traditional IRA or Roth IRA (assuming you meet the income limits), which offer tax benefits and typically have more investments options than an employer-sponsored retirement plan. The contribution limit for these accounts for 2019 is $6,000 if you are under 50.

Once you have a retirement account in place, set up automated contributions from each paycheck, as well as auto-escalations each year, if you're financially comfortable enough to do so. That way you won't procrastinate or forget to save more.

If you want to build up your retirement savings, here are some other helpful tips:

Don't miss: Most Americans say you need $1.7 million to retire—here's how much money to save each month to get there

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This simple equation will tell you if you're saving enough for retirement
This simple equation will tell you if you're saving enough for retirement