When to start taking retirement savings? The truth is, the sooner you start, the better. Starting your retirement savings as soon as possible gives your money more time to get organized, however, the logic is not that simple.
In fact, even small amounts saved consistently can result in significant growth decades later. But if you haven’t started yet, don’t worry, it’s never too late.
In this guide, you’ll learn when to start taking retirement savings, how to adjust your strategy according to your age. Read on and find out how small actions today can shape a more stable future.
When should you start saving for retirement?
The easy answer is: as soon as possible.
In principle, the sooner you start saving for retirement, the more time your money has to yield and work in your favor.
The time invested is even more decisive than the amount itself. This is because compound interest causes even small amounts to grow significantly as the years go by.
But if you haven’t started yet, don’t blame yourself. It’s never too late to take the first step.
The important thing is to understand that the construction of retirement is a process, and not a race against time. The decision to start can and should be adjusted to your current reality, respecting your budget, your goals, and the stage of life you are in.
Find out how to plan for retirement by seasons
Now, let’s understand how you can prepare according to the stages of life. Keep reading.
20 Years (When to start taking retirement savings)
In your 20s, the focus should be on eliminating debt and starting to invest.
This is the ideal phase to build good financial habits and take advantage of time in your favor.
The goal until the age of 30 is simple, to have saved the equivalent of an annual salary. If you earn $36,000 a year, that should be your cumulative savings target by the end of the decade.
A practical way to get there is to save 10% of your salary every month. If it is still not possible to reach this percentage, start with what you can and increase little by little. The important thing is to create constancy.
As there is still a lot of time until retirement, this is a phase in which it is worth taking a little more risk.
Investments in stocks or index funds (ETFs) can bring good returns in the long run, making your wealth grow faster. However, be careful, remember, financial results take time.
30 Years
When you reach 30, the financial goal also increases. The ideal is to have three times the amount of your accumulated annual salary until you are 40.
For example, if you earn $50,000 a year, the goal is to achieve $150,000 saved and invested over the decade.
This is a time in life when commitments increase, house, children, fixed expenses, among other expenses. Therefore, adjusting the budget becomes essential. The recommendation is to save at least 15% of the salary and, if possible, increase this percentage to 20%, maintaining regularity in the contributions.
40 Years
By the time you turn 40, the goal is to have accumulated four times the amount of your annual salary. If you earn around US$ 80,000.00 at this time, the ideal is to save US$ 320,000.00 by the time you are 50.
At this stage, the challenge is to control lifestyle, preventing expenses from growing in the same proportion as income.
The ideal is to maintain the habit of saving 20% of monthly income, but now with a more diversified portfolio.
50 Years (When to start taking retirement savings)
At 50, the goal is to have eight times the value of your accumulated annual salary. If you earn R$ 100 thousand per year, the ideal is to have at least R$ 800 thousand saved. This is the time to review goals, reinforce contributions, and approach retirement with more clarity and strategy.
Take advantage of this phase to maximize earnings, increase monthly contributions, and use available tax benefits, such as PGBL-type pension plans. The investment portfolio must also be adjusted, with greater weight in fixed income, protecting what has been built over the decades and ensuring more predictability in yields.
This step is decisive to correct course, if necessary, and ensure that the next few years are focused on consolidating, protecting and safely planning the transition to retirement.
60 Years
When you reach 60, the focus is on making sure everything is ready for the transition to retirement.
The goal here is to have ten times the amount of your accumulated annual salary. For those who receive about US$ 120,000.00 per year, this means having R$ 1,200,000.00 invested.
This is the time to review all financial planning, adopt a more conservative position on investments, and ensure that investments are enough to sustain your lifestyle for years to come.
Although this planning for decades seems challenging, the truth is that with discipline, constancy and adjustments along the way, it is totally possible to achieve a safe and peaceful retirement.
2 simple steps to start saving the right way
1. Understand how your finances are today (When to start taking retirement savings)
Before thinking about retirement, you should analyze your current financial situation.
You can’t save for the future if you’re committing all your income to immediate spending. It may seem obvious, but this is a step that many ignore.
Ideally, you should start by setting a realistic budget for day-to-day expenses, eliminating high-interest debt, and setting up an emergency fund. Only after that does it make sense to set aside a portion of the income for investments.
A practical reference is the 50/20/30 rule:
- 50% of the income goes to basic needs;
- 30% can be allocated to personal expenses and lifestyle;
- 20% for savings and investments.
Organizing finances in this way helps you stay in control, create margin to invest, and start retirement planning more securely.
2. Automate your investments
After organizing your budget and understanding how much you need for retirement, the next step is to automate your contributions.
Start by setting up monthly transfers from your bank account to an investment account. That way, you will avoid making common mistakes of investors. Consider the best broker options on the market, some alternatives are:
- Interactive Brokers;
- Charles Schwab;
- Fidelity Investments;
- TD Ameritrade;
- E*TRADE;
- Merrill Edge;
- Robinhood.
This habit turns the act of saving into something natural, preventing you from depending on willpower every month to make the decision.
If you work as a self-employed person, you can set up your own retirement plan. By the way, we can help you thinking about your specific case, see now how to do retirement planning for self-employed individuals.
Those who have a formal contract, on the other hand, can take advantage of employer-sponsored plans, such as 401(k), which often offer equivalent contributions.
Conclusion (When to start taking retirement savings)
Understanding when to start saving for retirement isn’t just a matter of age, it’s one primarily about mindset.
The sooner you start, the more your money will work in your favor through compound interest. However, even if you are starting late, it is still possible to build a secure future. From the age of 20 to 60, each decade offers unique opportunities and challenges. Invest a small portion of your income when you’re young, and increase your contributions as your age and income increase.
So, don’t wait for the perfect moment. The best time to take control of your future is now. With time, dedication and study about finances, you will undoubtedly be able to have good results, ensuring a peaceful retirement.
