And the most important reason for saving, McClanahan said, should be on everyone’s list: “What happens if I can no longer work? Will I be financially OK?”
It can take a lot of time to be able to answer that question in the affirmative. That’s why the importance of starting to save early — no matter how cloudy your future — can’t be overstated, experts say.
Here’s a quick example of why that is. If you invested $5,500 a year for retirement between ages 25 to 35, you’d have nearly $620,000 waiting for you at 65. That’s more than you’d have if you saved that same amount every year from 35 to 65 (which would be around $556,000). That’s, of course, because of the power of compound interest.
“Time is the greatest money-making asset an individual can possess,” said Ed Slott, a retirement savings expert.
For young people who don’t know exactly what they’re saving for, a Roth individual retirement account is likely the best place to park your money, McClanahan said. Even though a Roth IRA is technically a retirement account, you can pull out any money you’ve put in at any point without paying any penalties. (You can easily open one online or in-person at Fidelity, Charles Schwab and elsewhere).
“If you end up not buying a house, now you’ve got a nice head start on your retirement savings,” McClanahan said.
It can be anxiety-producing to sacrifice your quality of life now for the future, but it’ll be really encouraging to see your savings accumulate.