Key Takeaways
- TD Ameritrade’s recent release of their Millennials and Money survey showed a big difference between the age Millennials expect to retire versus when they will start saving for their retirement.
- Saving for only 20 years for retirement is hard to do because the compounding effect of money needs longer than that to truly be effective.
- The earlier you start to save for retirement, the better off you will be in the long run.
TD Ameritrade recently released their Millennials and Money survey, and I want to point out two of the findings I thought were interesting. The first one, is that the average age Millennials believe they are going to retire is 56. However, according to the survey, the average age they believe they are going to start saving money for retiring by age 56, is at age 36.
It may not seem obvious, but the compounding effect of money needs longer than 20 years to really pile up enough dollars to live off at age 56, especially since Millennials can expect to live, on average, in to their 90s.
So, let’s do a little bit of math here: Let’s say you start saving money at age 26, and it’s $5,000 per year for 30 years at 7%. What does that come out to? About $470,000. Now, if you wait until age 36 to start saving money, and you save the same amount at the same rate, what does that come out to? About $200,000. That’s a big difference. Almost a $300,000 difference, more than double difference in just 10 years.
You can see that if you wait until you are 36 to save, you are going to have to put a lot more money away every year to be able to retire at 56. It’s achievable, if you really want to go that route, but the whole point is that the sooner you start saving, the better you’re going to be at whatever point you end up retiring at. It will also hopefully make a big difference in the quality of life you have later in those retirement years, so you can enjoy doing more of the things you want to do.
Until next time, enjoy!
Gary