No matter what age you are, you’ve probably thought about retirement. But do you know when the best time is to open a retirement account? The answer: as soon as possible! Here, we’ll look at what happens if you open a retirement account at 25 and at 35 as well as how much money you need for retirement. Read on!
Age 25
If you start your retirement account when you turn 25, you can deposit $3,600 a year. If you do so and retire at 67 (which is when you can collect your full Social Security benefits), you will have contributed $151,200. If you have an annual return rate of 7 percent, that means your contributions will expand to over $900,000!
Age 35
Some people postpone their retirement planning until they’re in their 30s. If you open your account at 35 and contribute that same $3,600 a year, you’ll deposit $115,200. However, you would only have $425,000 once you hit retirement age—what a difference 10 years can make! The more time you save, the more time your money has to compound and grow.
How Much Do You Need?
You should base your retirement goals on how much money you’ll need in retirement. Most experts suggest that you save 15 percent of all your income for retirement, but this number can increase or decrease depending on your retirement goals. Figure out what you want your retirement lifestyle to be—if you want to see the world, you’ll need more money than if you’re planning on learning how to whittle.
Where Does the Money Go?
You’ll need a place to put your money while you save, since a traditional savings account won’t offer the same returns as other options. A 401(k) is a great option, but we also recommend that you look into the self-directed IRA. You manage this account, so you can decide on the investments you want to make over the years.
Now that you know the best time to open a retirement account, create your self-directed IRA and start saving!
