There are steps we can take to help address this looming retirement crisis.
First, individuals and families must make saving for retirement a priority. It can be difficult to think about your 401(k) or IRA when you’re living paycheck to paycheck, but putting a little bit away each month will make all the difference. The earlier you start saving, the better off you’ll be.
The long-term solution lies in the adage “time is money,” or at least the opportunity to make money. If you put in a little bit in savings each year starting at a young age, it will add up to a lot of money by the time you’re 65 years old – and much more than if you start saving for retirement when you’re 40 or 50 years old. A recent CNBC.com article showed the benefits of starting saving for retirement at 25 or 30 years old.
A $650 monthly deposit into a 5 percent compounding account will yield $ 1million after 40 years. A little over $10 dollars a day (the price of an average dine-in lunch) would yield half a million dollars. Run those same numbers over a 20-year period, and the results are $267,000 and $132,000, respectively.
The answer is obvious: start saving early, even if it’s a small amount, and get regular tax-free savings.