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When should you start saving for retirement?

Short answer: as soon as you begin working. Too late for that? Remember that saving will be easiest if you start now.

The amazing power of beginning early

Who wants to be a millionaire?

For many people, having a million dollars might seem like being elected President—a worthy but unattainable goal.

But getting to a million might not be that hard if you know the secret: time.

If you give your savings enough time to grow, you'll only need relatively small investments of money—made consistently—to wind up with a pretty big balance.

How much do you think you'd need to save each year in order to reach a goal of a million dollars? $20,000? $50,000?

In fact, if you save just under $4,500 per year over a 45-year career, you could have over $1 million by the time you retire. And if you have the opportunity to invest in a retirement plan that offers a matching contribution from your employer, your yearly investment could be as small as $2,200.

$1 could grow to much more by retirement—but it depends what age you contribute it

A bar chart showing that a dollar will grow much more when it's invested for a long time.

This hypothetical illustration assumes an annual 4% return after inflation. Figures are in today's dollars. The illustration doesn't represent any particular investment.

Make retirement your first priority, especially early on

It might seem backwards to worry about the last money you'll need before you think about meeting any other financial goals. But because compounding is so powerful, starting early gives you more flexibility later on in life.

Imagine you start saving at age 25 and dutifully put away $10,000 a year, including any matching contributions your employer offers. But at age 40, you need to stop saving for some reason.

Your friend starts saving at age 35 and saves the same $10,000 a year for the next 30 years, until you both retire.

At that point, all else equal, you'll have more money than your friend, despite having put away only half as much.

With time, you can invest less money but have more to spend in retirement

A bar chart showing that a dollar will grow much more when it's invested for a long time.

This hypothetical illustration assumes an annual 6% return. The illustration doesn't represent any particular investment, nor does it account for inflation.

Starting late? Turn up the dial on your contributions

Making the most of the early years of your career is one way to hit your retirement savings goal—and probably the easiest—but it's not the only way. If you have less time to save for retirement, you'll simply need to save more each year.

For example, as we saw above, if your goal is to have $1 million at age 65 and you save just under $4,500 each year starting at age 20, there's a good chance you'd meet your goal.

If you start at age 30 instead, you'll have to save about $9,000 each year for the same chance at reaching your goal.

Beginning at age 40? You'll need to save about $18,000 a year. And if you wait until age 50, you'll need to put away over $40,000 a year to give yourself a good shot at reaching your goal.*

In other words, no matter what your current age, you'll always be better off starting now rather than waiting until later.

Learn more about retirement accounts at Vanguard

We offer several types of accounts you can use to save for retirement. Figure out which one is right for you.

Open a retirement account

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REFERENCE CONTENT

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$1 could grow to much more by retirement--but it depends what age you contribute it

This chart shows that a $1 contribution will compound more if you give it more time to grow. If you contribute $1 at age 20, it could grow to $5.84 by the time you're age 65. If you contribute $1 at age 25, it could grow to $4.80 by the time you're age 65. If you contribute $1 at age 30, it could grow to $3.95 by the time you're age 65. If you contribute $1 at age 35, it could grow to $3.24 by the time you're age 65. If you contribute $1 at age 40, it could grow to $2.67 by the time you're age 65. If you contribute $1 at age 45, it could grow to $2.19 by the time you're age 65. If you contribute $1 at age 50, it could grow to $1.80 by the time you're age 65. If you contribute $1 at age 55, it could grow to $1.48 by the time you're age 65.

Layer opened.

Compounding

When earnings on invested money generate their own earnings. For example, if you invested $5,000 and earned 6% a year, in the first year you'd earn $300 ($5,000 x 0.06), in the second year you'd earn $318 ($5,300 x 0.06), in the third year you'd earn $337.08 ($5,618 x 0.06), and so on. Over longer periods of time, compounding becomes very powerful. In this example, you'd earn over $1,600 in the 30th year.

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With time, you can invest less money but have more to spend in retirement

This chart shows that if you start saving earlier, you can have a higher balance at retirement than someone who saves more but starts later. If you contribute $10,000 a year from age 25 to age 40, for a total investment of $150,000, it could grow to $1,058,912 by the time you're age 65. If you contribute $10,000 a year from age 35 to age 65, for a total investment of $300,000, it could grow to $838,019 by the time you're age 65.