Suze Orman: Why You Should Start Saving for Retirement Now
Written by
Angela Mae
Edited by
Carly Brashears
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Suze Orman, a financial advisor and author, believes in the importance of making saving for retirement as early as possible. As she has pointed out in a 2022 article, many people wait too long to start retirement planning, or they focus on other things that set them back — like their children’s college education.
As admirable as these other goals might be, here’s why Orman said you should instead focus on saving for retirement as soon as possible.
We also asked other financial experts whether they agree.
Time’s a Limited Resource
Delaying your retirement savings might seem justified if you’re instead saving for something like your child’s college fund. But as Orman pointed out, you won’t always be able to make up for lost time.
If you’re assuming you’ll save more money once you’ve got the kids covered, think twice. You might not have the same high-paying job in the future as you do now. And in some cases, people get laid off or have to switch to a lower-paying job in their 50s, which could also make it harder to play “catch up” on any retirement savings.
Anne Marie Ferdinando, member outreach manager at Navy Federal Credit Union, added that the greatest asset when it comes to growing your money is time.
“For young people, retirement may seem like it’s a world away, but the earlier you can start saving for retirement the better,” she said. “A little saved now at the earliest possible age adds up to a whole lot more later on.”
Compound Interest Is a Time-Based Game
The earlier you start saving, assuming you’re using an account with compound interest, the more money you can earn over time. And while you might be able to save up massive chunks of cash later on, you’ll never quite get the same benefit from starting early and having decades to earn interest on your savings.
“The time value of money makes $1 worth a lot more to a 25-year-old than to a 35-year-old,” said Tyler Weerden, financial planner and founder of Layered Financial. “The 25-year-old has an additional decade of compounding growth.”
Here’s an example he gave to illustrate this point:
“Jane starts investing $5,000 per year at age 25 and never invests another dollar after age 34. John gets a late start and begins investing $5,000 per year starting at age 35, and keeps investing $5,000 per year for 30 years until age 65.
“Jane invested a total of $50,000 while John invested a total of $150,000. If both John and Jane earn the same 8% return, Jane ends up with $787,180 while John has $611,730.”
Early Savings Can Eliminate Stress on the Kids
In a her article, Orman pointed out another issue with delaying retirement savings, and that is the impact it can have on your children — if you have them. When you get older, your kids might start helping you financially if they see you struggling. This could potentially delay their own retirement savings goals or cause them additional stress.
Retirement Doesn’t Offer Loans
As Orman mentioned, you’re not likely to get any loans to fund your retirement. If you end up at that point without enough money saved, you won’t have a lot of options.
As for delaying your savings for your kids, Orman noted that higher education is a choice your kids make. So, rather than set aside your own retirement goals to cover their college expenses, let them handle it. After all, they’re the ones who should be taking out student loans if they go that route — not you.
Getting Started: Retirement Savings and Financial Independence
Stepping aside from Orman now, here’s what Jay Zigmont, PhD, CFP, and founder of Childfree Wealth, said about getting started with your retirement savings — and financial independence.
“Reaching financial independence requires you to have a budget, get out of debt, have an emergency fund, and then save and invest for your future,” he said. “Paying down your debts is likely the best first step to investing in your future or retirement. Once your debts are paid, shift to saving in retirement accounts (to save taxes) and taxable brokerage accounts.”
Employer-sponsored retirement plans, like 401(k)s, can also be a great way to start saving for retirement.
“If you can, take advantage of any employer sponsored retirement plans and max out what they will match; this is free money!” said Ferdinando. “Even if you aren’t able to max it out from the start, consider opting in and slowly increasing your contributions over time.”
And if you don’t already have a plan for saving, now’s a good time to make one.
“Your budget will be a helpful guide to keep your spending within certain parameters, but it should specify some savings goals as well,” said Ferdinando. “To ensure you are staying on track, you should also check in on your budget regularly to see if or where you need to make changes.”
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