More than 25 percent of all Americans have no savings at all, let alone a retirement nest egg. But each year that you wait to start saving for retirement could mean thousands — even hundreds of thousands — of dollars in savings when you eventually need it.
In one scenario by Dara Luber, a retirement and long-term investing expert at TD Ameritrade, the total cost of delaying saving for retirement by 20 years is nearly $100,000. Luber factored in investing $100 a month for 20 years starting at age 21 and assumed a 5 percent annual return. Compounded monthly until age 67, that's just over $150,000. Starting just five years later at age 26, alternatively, came out to slightly more than $117,000 at retirement age,or $33,000 less. The cost of waiting 20 years nets only $55,000 — a difference of $95,000.
"The sooner you start, the more time you have to compound that growth," Luber said. The value of your retirement portfolio when you're ready to tap it will be largely based on the amount invested and the length of time it was invested. That's the missed opportunity many face.
"A lot of people are waiting to get started saving for retirement,” said Judith Ward, a senior financial planner at T. Rowe Price. For someone in their 20s, Ward recommends saving 10 percent of your income. "By 30 you should have saved [the equivalent of] half of your salary," she said.