When is the right time to start saving for retirement?

Obviously, the answer is as soon as possible. But it’s hard to know when it’s time to really buckle down when you’re young and in debt.

Tony and I are 24 and 25, and I had hoped to start saving for retirement this year. But the more I look at our finances and goals, the more I hesitate to start now.

As a grad student, Tony obviously doesn’t have access to an employer-based retirement fund. Neither do I in my current job. So any retirement saving we do at this point will be on our own.

We’d like to open a Roth IRA and start saving a little every month, even if it’s just $50 each. We can always increase that amount later. But then I start thinking about our debt and our likely cross country move in less than two years and all of our other goals, and I can’t help but feel like that money would be better spent on debt and liquid savings at this point in our lives.

I know that saving for retirement is essential, especially for my generation. But I feel like 20-somethings in debt should focus more on becoming debt free. Otherwise, we could wind up paying student loan debt until it’s time to send our own kids to college.

Even though our income is relatively low, I almost never feel deprived. This is one area where I really feel the constraint of our low income, though. After our bills are paid and our necessities are covered, there just isn’t enough left over to save for emergencies, save for our future, and pay down debt. If I split up the extra money between the three, I feel like we’re not making any headway on any of them. But if I concentrate my efforts on one or two, then I feel guilty for foregoing the third.

My fear is that it will only get harder, especially since we plan to live on one income. If we can’t find room in the budget for retirement savings now, how we will be able to once we increase our financial responsibilities and have children?

I trust I’m not the only 20-something in this predicament.

When did you start saving for retirement? Is it crazy for me to wait another couple years?

14 thoughts on “When is the right time to start saving for retirement?

  1. Marybeth at www.babygoodbuys.com

    I think you need to do what’s right for you, but, at the same time, the market conditions indicate that it’s a great time to start saving.
    25 years down the road, you might be happy you started saving 5 years earlier so you don’t need to work those extra years on the back end.
    With your aspirations, I think it would be smart to start saving a small amount, like you said, then see how you feel at the end of this year. I just wouldn’t delay everything 100%.

    Marybeth at http://www.babygoodbuys.com’s last blog post.."Deluxe" Graco Pack n’ Play $59.99 at AlbeeBaby!

  2. Angie

    We are big Dave Ramsey fans. Our 20-something-trying-to-get-out-of-debt plan is to pay off our debt, then roll all the money into retirement. It’s hard to see progress when you are doing a little bit of everything. But when you focus everything into ONE thing, you can really see your progress. The only exception to this (in our situation) is my retirement plan at work matches up to 5%. So, i’ve committed 5%, so i could get the employer match. Otherwise that’s like giving away free money.

    As soon as we get our last student loan paid off, we’ll really start putting away money each month into our retirement at a much greater pace than if we were trying to do $50 a month for a few years. But everyone’s plan is going to be as different as the next. You need to find out what works for you, and stick with it.

    If you haven’t read it already, I recommend Dave Ramsey’s Total Money Makeover, or Financial Peace.

  3. anne

    I agree with Angie’s recommendation about DR.
    I also have a retirement plan at work and my contribution is matched. After that, our money goes towards paying off debt.

  4. Megan

    I started my Roth IRA this year (I’m 22), but it is several years after I had planned to start one because I chose to pay off debts first. I would say that if you plan to go to a single income that it would be wise to start with just a little now ($10-20). Also, I know it’s difficult to thank about it- but working a part time job just for a few months to a year could help severly lessen (if not completely wipe out) your debt. When I was paying down debt I worked every small job I could get my hands on and ended up getting about $2,000 extra out of the way because of it. If you want to stay focused on debt right now that’s great- but make it fast! Get it out of your life NOW!!!

    A reccomendation- take the amount you would be putting into a Roth and plug it into a returement calculator. See what it would be when you plan to retire and decide if it’s worth it to part with it now or if you could make that amount up by setting aside extra later. Between 2008 and 2009 what I am saving will run around $250,000 at retirement. That’s a lot to think about!

  5. Kacie

    Are you familiar with Dave Ramsey? I forget. Anyway, I think he would say since you’re n ot getting an employer match, to just keep on going as you are and get out of debt first and then hit your retirement accounts hard.

    But then again, if you want to send $25-50 to an IRA each month, that might pay off, especially while the market is down.

    I like the suggestion of running the numbers to get an idea of what such contributions could potentially turn into by your retirement age.

    For us, Shane is contributing a tiny bit more than his company’s full match. It’s not enough right now, but we want to get our car paid off first. Then, we’ll increase retirement savings, start Johnny’s 529, and start saving for a house.

    Kacie’s last blog post..I have a cold, ugh. And some link love

  6. Deni

    I think Megan has a great idea by using a calculator to really see the numbers in black and white. You can’t argue with facts.

    For us, it would be putting $50 a month in an IRA while paying down debt… or 4 years later rolling what we were paying on debt into and IRA and putting several THOUSAND dollars a month away for retirement. Once that was fully funded – we build wealth. Although this is a long way down the road.

  7. momstheword

    I thought you might like to know that Lynnae at “beingfrugal.net” ing a thing where you can email any questions to a panel of people who do frugal blogs or finances or something. This might be a great way to get some good answers.

    I don’t know how you’re doing on your grocery budget (and I’m not trying to be to personal here so please don’t think you have to tell me), but have you seen some of those great blogs out there where people are feeding their families on $60 a week (and there are families, not a couple). You can find some on my sidebar under frugal sites. I am hoping to save some money out of our grocery budget.

    momstheword’s last blog post..BUILDING A FRIENDSHIP WITH YOUR SPOUSE

  8. Melanie

    Hi there
    Look at what your interest rates on your debts are. If you are paying more than what you could make on your retirement savings then you are best to pay off your debt first. i.e. if you are paying 12% in interest on your debt but only making 6% on your retirement investment then it doesn’t make any sense to pay into your retirement fund without paying off the debt first.
    However – start saving a little (even if it is just $50 a month) – this gets you into the HABIT of saving (which is more important than how much you invest).
    Good luck!

  9. MrsMoney

    I started saving for retirement when I got my first “real job” at the bank. I don’t regret it at all, but it certainly has taken a hit, just like everyone else’s. I was 21 when I started saving for retirement. I think you would be fine if you wait a few more years, but then again, now is the time to invest supposedly. It’s such a tough decision! Good luck!

    MrsMoney’s last blog post..My Free Living Room Makeover

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  11. Andrew

    I’m 24 and started saving for retirement right out of college. The sooner you start the better. Since you don’t have an employer match right now, set a small goal for your Roth IRA and go after your debt with a vengeance.

    Right now I do the following: 4% matched into employer 457 plan, maintain emergency fund, $5,000 into Roth IRA, budget some money for fun and anything left over goes into the wife’s Roth.

    Andrew’s last blog post..Shared Google Reader Items

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