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When should I start investing in retirement?

Why you should start planning for retirement in your 20’s?

If you are in your 20’s or 30’s, it’s never too early to start planning for your retirement. At the age of 18, every person enters adulthood and becomes eligible for many legal rights , one of them being retirement plans. There is no time like the present. If you want a great future , then it is important that you start investing and saving for retirement right away. 

Retirement plans come in various forms such as Individual Retirement Account (IRA), 401k etc . These retirement accounts allow your money to grow at a faster rate than conventional savings accounts/bonds due to their high liquidity options. However this can only become possible if you start early and maintain consistency with your savings till your retirement.

There are various factors that should encourage you to start saving at an early age :

Compounding returns

If you have taken advantage of compound interest then you would know how amazing it really is! It’s equivalent to “force multiplication” as it enhances the effects of even small returns exponentially . For example , take an instance where one person chose save Rs 10,000 per year for 15 years at 8% return on investment (ROI) and another person chose to save Rs 10,000 per year for 30 years at the same 8% return on investment (ROI). The total amount accumulated in both these cases is more or less equal. However the person who started early ended up with almost 2 times more money than the latter. This occurs because compounding returns make accumulated interest not only grow but also earn accumulated interest continuously .

Understanding compounding interest

Compounding interest is one of the most powerful tools that you can use to help grow your wealth. This is because it takes into account all of your investments and helps them accumulate at a faster rate. However, there are some rules to follow when using compounding interest for retirement planning purposes:

You can’t fast forward time 

When comparing different investment options, make sure that you take into account the amount of time over which each option will generate returns . In other words , don’t compare an option that generates returns in 10 years as against another one that will do so in 20 years because the former provides twice as much time as compared to the latter for things to develop .

What is compounding interest?

With compounding interest, the money that you make through your investments gets reinvested back into your account. This helps your money grow at a faster rate since it is able to generate returns over and over again . As time goes on , these returns help increase the principle amount of your investment . For instance, if you had invested $1000 with an interest rate of 10%, then after 1 year you would have made around $100 off this principle amount . However , once this principle amount has been increased , you are now eligible for interests on this larger sum as well! This cycle continues until the end of the chosen period for which you have decided to invest.


One of the most important factors that determine how much your money can grow is time. For example – saving $10,000 per year will be insufficient to achieve a comfortable retirement if you plan to retire after 40-50 years of age. Whereas investing $10,000 per year over a period of 30-40 years will make you financially independent provided you choose the right investment / retirement plan .

Start saving for retirement early

Starting to save money at an early age can have a tremendous impact on how much money your savings grow over time. 

In fact, starting as early as 20 years old can make a significant difference as compared to those who start saving later. 

Let’s take a look at some of the reasons why it is important to start planning for retirement early:


Inflation is one of the main problems faced by retired individuals due to which they lose out on increasing their standard of living after retirement . However , if you start investing and saving right from the beginning, the value of your money will increase as it grows with time. This can help you maintain a lifestyle that is similar to your current one .

Your Salary Growth 

If you start saving and investing early enough , then there is a great chance that you will be able to accumulate a lot more wealth over time. However, if you wait too long and don’t save anything till your late thirties or forties , it will be hard for you to catch up later on in life . There is almost no way around this fact – the earlier you invest and save, the higher are your chances of achieving greater success .

The sooner you start saving and investing , the better off financially you would be during retirement. In most cases, you would be able to save 20%-25% of your monthly income when you start in your early twenties . This number may drop when you get closer to retirement , but it still will remain fairly high when compared to those who wait until their 30s or 40s .

You are fresh out of school 

Your first salary is enough to ensure that you have a decent standard of living. By investing in various types of savings plans including retirement plans, you can ensure that your post tax income keeps increasing with each passing year. This will help you focus on your career more efficiently as well as allow for greater financial freedom later in life. If not now, then when? Start planning and save wisely !

Start budgeting for retirement in your 20s

Planning for retirement in your 20s can be a daunting task if you aren’t aware of the various options available . However, with a little effort and patience, you will be able to achieve your dreams. In this article , we will discuss some of the best ways to plan for your retirement when you are in your early twenties.

There are numerous tax-advantaged retirement plans that can help you save money for the future. Some of them include: [401k/403b/457(b)] – Plans offered by employers allow workers to contribute a portion of their salary before taxes , which will eventually help them build a solid nest egg towards their golden years . Traditional IRAs – Individuals who have no access to employer-sponsored plans are allowed to set aside a certain amount of money every year , which can be invested in stocks, bonds, mutual funds or other types of investments . Roth IRAs – This plan is similar to its traditional variant, but contributions are after-tax. Therefore, withdrawals taken later while retired will not lead to additional taxes . Individual 401k/403b Plans – These plans are especially helpful for self-employed individuals who don’t have access to an employer-sponsored retirement plan. They typically allow savers to put away more than the limit imposed by their employers .

Since you don’t know how much income you will eventually make or how long you would live post retirement , it’s recommended that you at least 10%-15% of your salary for investments . This will help you ensure that your lifestyle doesn’t suffer a huge setback because of a slight shortfall in returns or other unforeseen circumstances .

Employer-Sponsored Retirement Plans 

If your employer offers any type of matching program, then do yourself a big favor and contribute as much as possible towards these plans so that they can match your contributions . Not only will this help you get closer to your retirement goals , but you will also have more disposable income in the short term.

If you are not covered by any employer-sponsored plan, then it is advisable that you go ahead and sign up for a Traditional or Roth IRA. You can start saving with as little as $100-$200 per month, which means that there is nothing stopping you from taking advantage of these plans right away !

Since you spend almost your entire life working for somebody, it is only fair that the time comes to reap the benefits of all those years of hard work. However, there are various factors that can affect how much you will receive in retirement benefits as an employee. 


If you want to enjoy a comfortable retirement , it is important that you start saving and investing for your old age right away .  Make sure that you take into account all of the various factors that can influence your retirement benefits before choosing an option, such as time considerations. Compounding interest can be used effectively for planning purposes, but it is important to remember that its effects cannot be fast-forwarded in time .

The end result should always be aimed at getting the best possible return on your investment !

Saving for retirement can seem like a daunting task, but it is important to start as early as possible so that you can take advantage of compounding interest. Employer-sponsored plans are a great way to get started, but don’t forget about Traditional and Roth IRAs if you don’t have access to one. Make sure to contribute as much as possible to get the employer match, and review your retirement plan options every year to make sure that you are on track. 

If you need help with finances or just want to speak with someone about potential investments, connect with one of our financial planners today:

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