Overcoming inertia to save for retirement

Entry-level Emily: Too little earnings
Entry-level Emily: Too little earnings © michaeljung/

Don't ever think you're too young to save for retirement. As a new worker, "entry-level Emily" has something far more valuable than her experienced superiors: time. A 25-year-old worker who saves $5,000 a year throughout her career will amass nearly $1.3 million by the time she's 65, assuming 8 percent annual growth. If she waits until age 35 to save, she'll accumulate less than half that amount -- $566,416 -- assuming the same return.

Bottom line: If you're just starting your career, don't walk to open a retirement account. RUN.

Grab free money. Have access to a 401(k)? Save enough to qualify for your employer's matching funds. That's typically 50 cents for every dollar you save, up to 6 percent of earnings.

Automate your savings. If you don't have a 401(k) plan at work, set up direct deposits into an individual retirement account at a brokerage firm before you spend your whole paycheck.

Go for growth. "An entry-level worker should put 100 percent of their retirement fund in equities," says CFP professional Drew Tignanelli, president of Financial Consulate in Hunt Valley, Md. The reason: Stocks grow more over time, and you're young enough to ride out dips in the market.

Rough it. Saving early is potentially worth millions, so make sacrifices now. "Keep eating ramen noodles, and save like crazy until you're 30," says Rick Kahler, president of Kahler Financial Group in Rapid City, S.D. "Then you can look at upping your lifestyle."


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