YOU ASK:

At what age you should start retirement planning and saving?

WE ANSWER:

The earlier, the better! It's never too early to start saving up for retirement.

When you start saving up for retirement at an early age, you actually have to save a smaller portion of your salary as compared to when you start at a later age. Not only will you get to have more "payment periods" or months when you put in a certain percentage of your money, you also have more time to allow your fund to grow.

Indeed, however small your nest egg started, it will grow big when this fund has been earning compounded interest for 30 years or so! If the fund is saved up under a 401k, then it would have been able to earn a lot of interest through placements in stocks, bonds and mutual funds.

When you are closer to retirement, you will need to save more of your salary in order for you to have enough during your retirement age.

When you start saving at these ages, a general rule will be to save the following percentages of your salary:

  • 20s - 10 to 15% of annual salary
  • 30s - 15 to 25% of annual salary
  • Early 40s - 25 to 35% of annual salary
  • 45 and above - 35% to 50% of annual salary

Of course, if you start early, you are giving more time for your money to grow. As your money accumulates over time, you won't have to save more at a later age since by that time you will have a considerable nest egg already tucked in.

Another important reason why you should start the discipline of saving up early is that you get to have that discipline ingrained in you. There are so many reasons why people tend to put off savings, they say that they're still paying for the house, or buying a new car, or paying for the children's education. If you are not careful and not that disciplined, you may find yourself only a few years away from retirement with no sizable fund to provide for you during those days.

Even if you feel that your earnings are not enough to tide you over for the month, if you are creative and careful, you can still tuck away an amount, no matter how small.

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