Saving for your retirement is important, like never before. Yet very few people have enough saved up for their retirement. They seem to believe they can continue to borrow their way through life. It seems it is only around 5% of the American population that has enough saved to have a retirement with the same standard of living as when they worked.
Demographics in the western world are changing. More and more of us become senior citizens. It has a significant impact on our possibilities as senior citizens. Not only will governments have problems supporting the current level of expenses for senior citizens. At the same time, the demand for specific goods for senior citizens will very likely exceed what can be supplied. Health care will, for example, be put under a much heavier strain than it already is, as senior citizens need more health care than young people.
At the same time, there will be relatively fewer people in the age group of working people. Therefore, the people who do work will have to work harder to be able to sustain the economic life of our societies, if nothing is done by the government to avoid this. There will be fewer people to pay taxes to pay for the essential services the State provides. Some of it will most likely be offset by an increase in productivity. But, if we don’t start taking this problem seriously, we can be the first generation to actually be worse off than the generation before us.
So what can you do about it? We need to choose politicians who take the problem seriously and do something about it. But you also have to take care of your own life. You have to start saving for your retirement – and the sooner the better. This is the major thing you can do as an individual to help yourself. If you want to be able to lead the same life when you retire as you do now, there is no way around it. You have to save for retirement, and save a lot.
One of the important factors of saving for retirement is to start young. If you are young when you start, you can retire with a substantially bigger nest egg than if you start late. This is not only due to the fact that you will be saving for more years. It is also because the first years are the most important years.
If, for example, you save $1,000 every year from when you are 20 until you are 30 and then stop, you will end up with $112,540 when you turn 60 if you receive a 7% return. If instead you decide to wait until you are 30 and then save $1,000 every year until you are 60, you will only have $101,070 when you are 60. So saving for 10 years when you are young is more important than saving for 30 years when you get older. That is something to think about!