Gretchen Hollstein, Partner and Senior Investment Advisor at San Francisco Bay Area-based Litman Gregory says not starting early is one of the biggest mistakes people make when it comes to saving for retirement.
Why does when you start matter? One of the greatest contributors to the size of your eventual retirement kitty is how long you spend building it up. To put it starkly, consider a very basic illustration. If you start saving $10,000 a year when you’re 25, you could have just over $1 million by the time you reach 55 (assuming an annual return on your investments of 7 percent).
But let’s say you waited until 35 to start saving. Even if you sock away $20,000 a year for the next 20 years, you’d still wind up with roughly $200,000 less in savings by the time you’re 55. Blame the disparity on the magic of compounding.
Jason Sherr, Senior Vice President and Investment Officer at Wells Fargo Advisors, sees people struggling most with getting organized.
“Most people do not have a plan,” he said. “Get something in place even if it is really basic. The plan helps to get you motivated and you know what you are working toward.”