Why Save for Retirement in Your 20s?

When you’re in your 20s, retirement seems like such a distant goal that it hardly seems real at all. In fact, it’s one of the most common excuses people make to justify not saving for retirement. If that describes you, think of these savings instead as wealth accumulation, suggests Marguerita Cheng, CFP, CEO of Blue Ocean Global Wealth in Rockville, Maryland.

- Randheer Mallawaarachchi

Anyone nearing retirement age will tell you the years slip by and building a sizable nest egg becomes much more difficult if you don’t start early. You’ll also probably acquire other expenses you may not have yet, such as a mortgage and a growing family.

You may not earn a lot of money as you begin your career, but there’s one thing you have more of than richer, older folks: time. With time on your side, saving for retirement becomes a much more pleasant and exciting affair.

You’re probably also paying off your student loans, but even a small amount saved for retirement can make a huge difference in your future. We’ll walk through why your 20s are the perfect time to start saving for those post-work years.

Compound Interest Is Your Friend

Compound interest is the number-one reason it pays to start early with retirement planning. If you’re unfamiliar with the term, compound interest is the process by which a sum of money grows exponentially due to interest more or less building upon itself over time.