When Should You Start A Retirement Fund?

The earlier you start, the better.

Bea Ong, 23, has just started working, and she’s enjoying finally having her own money to spend on whatever she wants. To her annoyance, her parents keep nagging her to put some money aside and even start a retirement fund. But isn’t 23 too early to be thinking about retirement? Can’t she just enjoy her youth and worry about all that later?

In a word, no. As a rule, the earlier you start saving and investing in your future, the better. Why? Because your money will have more room to grow, you’ll actually end up with more.

What's the right age to start saving for retirement?

How compound interest works

The beauty of saving regularly in a retirement fund is that your interest for the first year gets you more interest in the second! This is the magic of compounding.

So, if you start earlier, your savings are going to gather more interest than if you start later. If you want to see multiples of your investment, start early.

Let’s say Bea starts investing $100 a month in a retirement account with an 6% annual return for just 10 years—she stops contributing when she turns 33. By the time she’s 60, that money will have grown to $78,731.69.

But what if she starts a retirement fund 10 years later, at the age of 33 instead? Even though she invested the same amount of money, she’ll end up with just $43,963.37 because the money didn’t have as much time to grow. That’s more than 40% lower than what she could have earned if she started saving earlier!

Remember the rule of 72. If you divide 72 by the rate of interest, it will give you the number of years it will take for your investment to double itself! So logically, if you start early, you will see your wealth being multiplied, as in Bea's case.

So is 33 too late to start saving for retirement?

Of course not! If you haven’t started a retirement fund yet, now’s the best time to do so. Here are some tips to help you along as you start your fund. Remember, when it comes to savings and investments, it’s always better late than later!

1. Commit

Age to start saving for retirement can be even now! You don’t have to commit to a huge figure, but when you do decide to contribute a certain amount, make sure that you’re faithful in doing so.

2.Take advantage of your corporate retirement fund

If your employer offers a retirement fund, make the most out of it. Some companies offer to match their employees’ contributions by a certain percentage, so if this applies to you, make sure that you always invest enough to get a match.

3.Keep contributing, even with added responsibilities

Contributing to a retirement fund when you’re young and single is generally easier because you don’t have to worry about supporting anyone else. Once you have a family and other responsibilities, that doesn’t meant that your retirement is no longer a priority. You owe it to yourself to invest in your future.

There is no set age to start saving for retirement at the end of the day, consistency matters. For more tips on saving up for your retirement, whatever your age, click here.