Saving a little each week can have a big impact on retirement

Retirement Exit

Shortly after I graduated from North Park University, I took on a full time position with a property management company. I was 25 at the time and thankful for the opportunity — getting a full-time job right out of college was a blessing. I stayed at that job for about five years.

During that period, I saved exactly $0 for retirement. Nothing. I wasn’t completely irresponsible with my money: during that time, I saved for a wedding and a honeymoon, purchased some necessary items to furnish a new apartment, and paid for a vacation with cash to avoid racking up credit card debt. My wife and I also put together a “rainy day fund” that covered about six-months-worth of expenses. But somehow, despite being fiscally responsible, I never once considered saving for retirement.

I didn’t make a lot of money at that job, but in retrospect, I didn’t need a lot of money to save for retirement. By cutting one or two expenses, I could have easily put $25 a week — $1,300 a year — in a Traditional or ROTH IRA.

Had I started to do this at the age of 25, continued to do so until the age of 65, invested all that money in a ROTH IRA, and received a conservative 4% annual return, my retirement savings would look like this:

According to Bankrate.com’s ROTH IRA calculator,* I would contribute $52,000 over 40 years and my IRA balance would be $128,474. Of course, I’ll need more than that for retirement, but it’s still not bad for $25 a week!

Unfortunately, I didn’t put this plan into action five years ago. So what if I started this retirement plan at the age of 30?

In this scenario, I’ve contributed $6,500 less due to starting five years later. But because of interest from investing, I’m projected to have $28,896 less in my ROTH IRA for a total of $99,578 by the age of 65.

The sooner you start saving, the better. But if you missed opportunities to save and invest in the past, don’t let that discourage you – there’s no time like the present to start planning for retirement! These projections indicate I would have had almost $29,000 more had I started saving earlier, but having $99,578 is a lot better than having $0! And as you can see, you don’t have to be rich and invest a lot of money; saving a little each week can have a big impact when you retire.

*Tables and graphs are estimates and projections, and are used for illustration purposes only. They do not indicate guaranteed future dollars based on the described savings plan.

One thought on “Saving a little each week can have a big impact on retirement

  1. Pingback: Your financial plan | Covenant Trust Company

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