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Fall 2013
Vol. 57, Number 3
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Saving early for retirement


Have you started saving money for retirement yet? It's more important than you may think—no matter your age.

Saving early for retirement is the best way to maintain financial independence and security later in life. "Regardless of the amount you save, you will definitely be in a better situation if you start early than if you wait until your mid-30s or 40s," says Jack VanDerhei, research director of the Employee Benefits Research Institute. "The longer you wait, the more you will have to save—until it becomes too great a burden."

But many workers lack access to a retirement plan or decline to take part in one. According to the U.S. Bureau of Labor Statistics (BLS), less than one-third of nonfederal workers had access to a defined-benefit plan, better known as a pension, in March 2012. And although about half of workers had access to a defined-contribution plan, such as a 401(k), only 68 percent of them saved in one.

Often, workers wait too long to start thinking about saving for retirement. According to the Center for Retirement Research at Boston College, of workers in 2010 who were eligible to participate in a 401(k) plan, 60 percent contributed to it when they were in their 20s, compared with 84 percent in their 50s.

Workers also are saving too little. Experts typically recommend that workers plan to save 8 to 11 times their annual income for retirement. But according to the National Institute on Retirement Security, 4 out of 5 working households had saved an amount less than their annual income by 2010. Even when the value of other assets, such as a home, is included, two-thirds of households approaching retirement had not saved enough.

Especially for workers just starting their careers, the message is clear: start saving now, no matter how far in the future retirement seems. "Learn from those who are retiring today," says Denise Appleby, owner of a retirement consulting business. "Otherwise, you might regret not saving enough, early enough."

This article provides an overview of different ways to start saving early for retirement. The first section describes retirement plans and investment options. The second section explains how to choose a plan and investments. The third section discusses ways to save more. Resources for more information are listed at the end of the article.


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U.S. Department of Labor
Bureau of Labor Statistics

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Last Updated: June 25, 2013