Saving for Retirement

Whether you’re a post-graduate just starting to get a paycheck, a young professional in the workforce, or a middle-income new parent, it’s never too early to begin saving for retirement.

Although most people in the younger demographic don’t usually think about building wealth for their long-term futures, financial analysts say the earlier you begin to save, the better off you’ll be.   And, you don’t need to have a high income to start growing your nest egg. The amount you save depends on how much you can afford.

Create a retirement budget and start saving something

Start small – it could be $25 a week or $25 a month – but any amount you can budget to put away in a separate account designated for retirement will earn compound interest. Even if you have a low income, everyone has discretionary funds they use– from that extra foamy latte at the mall to that jumbo popcorn at the movies.

The fact is, these are small pleasures but skipping them a time or two can really add up. Once you start tracking where your money goes through a detailed budget, you can start to reign in your spending. Financial managers say the interest you can earn on that retirement savings will compound impressively over time.

“Let’s say you start saving at age 25 and manage to put aside $500 per year in a tax-deferred retirement account, you’ll accumulate more value by age 65 than if you started to invest $1000 a year at age 45 because investing a smaller amount over a longer period of time can grow significantly more than investing a larger amount over a shorter period of time,” said Chris Lean, investment director, Aisa International.

Continually analyze your budget and automate your savings

As you get older, your lifestyle naturally changes, your wants and needs adjust, and your earning power increases or decreases according to your situation. Set up automatic transfers between your checking account and retirement account so you’re not tempted to spend that extra cash each month.

While it’s important to automate the savings process by having a pre-designated amount transferred per month, it’s easy to forget to adjust that set amount – especially upward, as you earn more cash.

Analysts say it’s not a “set it and forget it” situation – continually analyzing your budget monthly or quarterly will ensure you’re making the necessary adjustments to your spending and savings habits. For more detailed tracking and planning, Bankrate recommends using its retirement calculator to create a comprehensive savings and spending plan as you work towards retirement.

Wealth managers also say it’s important that you don’t co-mingle your extra cash. Have separate accounts for emergency funds (three to six months of living expenses to cover unexpected costs), that big holiday trip abroad, and long-term retirement savings.

Pay down debt and reconcile 401(k) contributions after age 50

Hopefully, the larger life events contributing to your high-interest debt – credit cards, student loans, car notes, and mortgages – will be behind you by the time you reach age 65. Financial managers recommend setting a goal of having these balances nearly or completely paid off by the time you retire so you’re not still owing money when you’re no longer earning.

Your employer-matched yearly 401(k) contributions are limited until you reach age 50.  After that, you’re eligible to pay more into those savings funds than would be normally allowed through “catch-up” contributions.

“You can boost your retirement fund through these contributions if you haven’t been able to save as much as much as you wanted to in your younger years,” Lean said. “If you’re already making the maximum contribution to your 401(k) and can afford to increase this, making catch-up contributions can save you a substantial amount of money in taxes.”

According to the Internal Revenue Service (IRS), annual catch-up contributions of up to $7,500 for 401(k) plans and up to $1,000 for traditional or Roth IRAs are allowed in 2023.


The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up-to-date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not accept any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.


Chris Lean

Chris is a Chartered Financial Planner who writes blogs and articles to simplify and explain some of the financial issues that affect UK expats. Subjects include; hot topics, regulation and the ever-changing world of finance.

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