When might be the best time to start saving for retirement?

58% of Americans have under $1,000 saved, and 73% have less than $5k saved up.

A separate study found a similar (but even worse) finding, that 6 in 10 Americans don’t even have $500 saved.

Europe is no better, with almost 30% having absolute zero savings.

So when might be the best time to start saving for retirement?

Let’s dive into the topic 🙂

When exactly might be the best time to start saving for retirement? 

Generally, you should start saving right now no matter what age you have.

When might be the best time to start saving for retirement?

It makes no sense to wait unless you’re in a temporarily difficult period where you cannot save (i.e. You have just been fired or moving house). If you find that this period is lasting longer than a year, then things need to change and this is no longer a valid excuse to not save.

The compound effect

The compound effect

Saving from early on in life, of course, means we have a longer time to build up our savings.

More months where we have saved $100 means more $100s. But the concept of compounding makes this even more important – and is something that is really ignored.

Even those who are aware of it often underestimate it, so here’s a quick reminder:

Compounding interest is an interest in the interest – it is where the profit from interest is reinvested, and the returns are exponential (accelerates).

This is possible in many investment opportunities like:

P2P lending

Index funds

Real estate crowdfunding


Let’s take a look at one example:


 Non-compoundedCompounded (monthly)
Interest rate:6%6%
Balance after a year:$106$106.17
Balance after 30 years:$280$602.26 😎

The above example shows that interest can double your savings pot over time, but in the same period, compounded interest may quadruple it.

Compounding doesn’t just refer to interest. It’s a lifestyle change.

The concept can be applied to your habits. If you begin your saving habits now, you will solidify them sooner and they will be your “second nature”. 

It’s much more difficult for someone in the later stages of life to change their behavior than someone in their 20s. Not to say that 50s is too late, and we can still certainly learn new habits. 

However, when learning positive habits from a young age, it will carry forward through more of your life, like when having kids, where saving is much more difficult and requires some prior practice and more competence.

Why don’t we save in general?


save for retirement

The problem is that many people do not feel the need to start saving until they’re older. They ignore it all and instead try to cope with the present life.

They didn’t figure it out what I’m sharing with you.

To put away some money when you’re 25 for a time when you’re 70 can seem irrational. We live in the moment, right?  😊

Who knows, you may not live that long? Why save and suffer during the healthy part of your life, so you can have money when you’re not healthy enough to travel the world?

Well, that’s the issue:

We actually don’t need to retire at the traditional retirement age.

What? What do I mean by that?

We don’t have to wait until we are arthritis and low energy before we can start enjoying a leisurely life. The concept of early retirement or living on your own terms is possible.

Let me share more about this with you… 🙂

Maximize your savings by investing

Savings accounts get approx
1.3% in the UK. These returns are completely offset by inflation (devaluation of money), which averaged 3.15% in the US since 1913. In fact, you are losing money if inflation is greater than your savings rate – what incentive is there to save then?

Some countries in unstable environments (much of the middle-east) will offer unusually high basic savings rates, but these can’t be trusted as there is a risk of not getting your money back. 

Instead, you can get a greater return from your savings if you start investing.

It’s a great way to make passive money and speeds up the saving pot for retirement or a life without financial stress.

This is actually the main principle behind
financial independence: to spend less than you earn, and invest the money instead.

Financial independence is a movement of becoming financially free. By focusing on savings, and investing them wisely, we can build up enough wealth to live the life we truly want.


💡 Read my 7 steps plan to financial freedom


This is what was meant earlier by not “having to wait until retirement age”
. Compounding our frugal habits, savings and investing the rest can bring forward our retirement age much earlier. This cannot happen without a plan though.

There must be a goal/vision, savings target and steps of priority.


For example:


  • Retirement goal: 45 (in X amount of years’ time). This helps you focus on the big picture.
  • Savings rate: 45%. Your savings rate is the amount you save of your income as a percentage. Anything above 20% is decent, but many can achieve 70% to 80% if they have no mortgage/rent.
  • Key steps (in order): Build an emergency fund -> Pay off high-interest loans -> Start investing -> Build a stronger emergency fund (several month’s expenses) -> Pay off other loans & mortgage -> Reach financial independence

These steps sound grand, but it is the small habits that make them achievable. Having those milestone goals at each step can help us keep focus.


Why is it important to start saving for retirement early?

The overall goal of financial freedom sounds like the only important thing here, but it isn’t. Our lives are not happy only when we become financially free. The process is more rewarding than that.

Even the first step alone (building an emergency fund) can be a life-changer. Given the statistics above, where over half the population has under $1,000 in savings – the emergency fund is necessary for our mental health. 

Work is relentless, especially if you don’t enjoy it. However, the emergency fund alone can make us feel less pressure from our jobs. Even if we got fired or completely fed up, we could afford to find another path. It is a breathing space.

The breathing space only increases throughout the process. Being debt-free is a freeing feeling. It can reduce our monthly outgoings and help us increase our savings even more. 

You will find that at each step of the process, actually. Each step helps accelerate to the next step – a bit like a compounding effect 🙂

That’s it.

I hope you liked this blog post about “When might be the best time to start saving for retirement?”. I will end this with some frequently asked questions.

Frequently asked questions about saving for retirement

Can I start saving for retirement at 40?

Sure you can but the sooner the better. As I mentioned, you should not see it as a “standard” retirement plan. See it as a unique opportunity to build your life in the direction you want. Who says you have to be 70 or any other age to reach your dream life?


Is it too late to save for retirement at 50?


Yes, unfortunately (it’s for fun 😂). You have to start now as time will run out. I would really suggest that you go through all your finances and try to increase your earnings. In addition, you should have the most focus on your savings as it will have the most impact. I really hope you will read more about personal finance and how to save money so you get started. Good luck – it’s never too late!

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Peter Michael

I'm an investor and the blogger behind My Investment Blog. I write about investment, financial independence, personal finance, and personal development. I try to combine the topics and show my journey towards financial freedom.

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