Starting Early: It Pays Off Now…and Later

If you’re in your 20s or 30s and have already started saving for your retirement—congratulations! You’re on your way to a more financially secure future. You know that although your retirement may be quite a few years away, it’s never too early to plan for the long term.

If you find it challenging, especially early in your career, to allocate some of your income to your retirement plan, how can you help yourself achieve the retirement of your dreams? One of the most important things you can do is to contribute whatever you can to your retirement plan account.
Why ?  Because, generally speaking, the sooner you start saving, and the more you save, the more money you could have set aside when it’s time to retire…so every little bit helps.

Enjoy Potential Tax Savings Today
In addition to helping contribute to your future financial security, there are also benefits you can enjoy today when you participate in your retirement plan. For example, you may save on current taxes—because your contributions will be made on a before-tax basis*. This means you do not pay taxes on your contributions until you withdraw money from your account. And wise savers know that that money should stay invested until retirement.
Best of all, your contributions will cost you less than you might think due to their pre-tax treatment—since your contributions are made before taxes are taken from your paycheck. Our Payroll Deduction Calculator can help you determine how little it may cost you to begin or increase your contributions.1
* Except for participation in the Roth feature of an employer-sponsored retirement plan,

Put Time on Your Side with Compounding
When it comes to investing, time can literally be money. This is particularly true with respect to an investment process known as compounding. Compounding is what happens when the money you save (in a savings account, a mutual fund or an employer-sponsored retirement plan) grows—and that increased amount remains in your account to be reinvested to potentially earn even more. To learn more about compounding, be sure to read Time Is Money: The Magic of Compounding.

The Earlier You Start, the Better
If you haven’t yet started saving for retirement and are waiting (since you may feel you have plenty of time), here’s why you don’t want to wait another day: because the cost of waiting can have a substantial impact on your retirement account balance.

How Much Waiting Could Cost You
Here’s an example: Let’s say you’re 25 years old and are considering contributing $100 per month to your retirement plan—which translates to a $1,200 contribution each year. If you’re like many 25-year-olds, you might be tempted to wait awhile (perhaps five years) before saving for retirement. But let’s look at what a difference those five years could make to your retirement account balance when you’re ready to retire.

If you start saving at the age of 25, by contributing $100 per month to your plan, your retirement account will have the potential to grow to $196,857 by the time you reach age 65.2 But look what happens if you wait to join the plan until you turn 30. Waiting five years could mean your retirement account balance might only grow to $141,745—meaning that waiting five years could cost you $55,112.

Our Don’t Delay Savings Calculator can help you learn more about how much it might cost you to delay saving for retirement.

Take Control of Your Financial Future Today
Contributing to your retirement plan is one of the best ways to give yourself greater long-term financial security—regardless of your age. If you’ve already started saving, you’re on the right track! But you might want to consider increasing your contribution level periodically to further fuel your retirement savings. If you haven’t started saving through your retirement plan, think about enrolling right away, and contributing what you can.
Regardless of your situation—whether you’re about to begin saving, or want to learn about the impact a larger contribution might have on your paycheck—be sure to check out our Take Home Pay Calculator. It will help you discover how little it can cost to give yourself a more secure financial future.
For personal assistance in determining the retirement savings contribution level that might be right for you, or to get an idea of what you will need in the way of retirement income, be sure to consult a financial professional or a Prudential Retirement® Counselor. Simply call 1-877-PRU-2100 toll free, Monday through Friday, from 8 a.m. to 6 p.m., ET.

1Amounts withdrawn (except qualified Roth withdrawals) are subject to income taxes. Withdrawals before age 59 1/2 may also be subject to a 10% federal income tax penalty and plan restrictions (10% penalty does not apply to 457 plans).

2Source: Investment Returns Calculator. This example and the compounding concept are hypothetical, for illustrative purposes only and are not intended to represent the performance of any specific investment, which may fluctuate. No taxes are considered in the calculations. Assumed 6% rate of return for a portfolio that includes variable investments. Based on a hypothetical rate of return of 6% annual interest compounded monthly. Please keep in mind that it is possible to lose money by investing in securities.

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