Why It Matters to Start Saving for Retirement Early: Your Financial Success Depends on It

Here’s a striking finding: according to research by Voya Financial, 64% of Americans wish they had begun saving for retirement during their 20s rather than waiting. This widespread regret highlights a fundamental truth—why is it important to save for retirement, and why do so many people realize this too late? The answer lies in understanding how the combination of time, compound growth, and financial flexibility can transform modest monthly savings into substantial wealth. Whether you’re juggling student loan payments or saving for a home down payment, starting retirement savings early should be part of your financial strategy.

Time is Your Greatest Asset in Building Retirement Wealth

The most powerful force in long-term investing isn’t luck—it’s compound interest. When you deposit money into a savings account or investment vehicle, you earn returns. But here’s what makes early saving genuinely important: those returns themselves generate additional returns, creating exponential growth over decades.

Consider a simple example. If you place $10,000 into a high-yield savings account earning 5.00% annual percentage yield (APY) compounded monthly, the results vary dramatically based on how long you leave the money untouched:

• After 17 years: $13,355 in interest earned
• After 27 years: $28,466 in interest earned
• After 37 years: $53,354 in interest earned
• After 47 years: $94,345 in interest earned

The difference between starting at age 20 and age 27 can mean an additional $15,000+ in growth—and you haven’t even contributed additional money.

Now imagine a monthly contribution strategy. Someone saving $100 monthly until retirement age of 67 would accumulate vastly different results depending on when they began:

• Starting at 20: $56,400 in total contributions generating $170,028 in interest
• Starting at 30: $44,400 in total contributions generating $83,650 in interest
• Starting at 40: $32,400 in total contributions generating $35,919 in interest

This demonstrates why beginning to save for retirement early creates such an enormous advantage—your money literally works for you while you sleep.

Young Investors Can Take More Calculated Risks for Better Returns

When you’re in your 20s or 30s, you have something more valuable than an immediate paycheck: time to recover from market downturns. This makes it important to save for retirement using investment strategies that older workers typically cannot afford.

A young person can comfortably invest in stocks, index funds, or other growth-focused assets that carry short-term volatility but historically deliver superior long-term returns. While a $10,000 deposit in a high-yield savings account earning 5.00% APY grows to $38,466 over 27 years, consider what happens if you invest that same $10,000 in S&P 500 index funds.

Historical data from 1996 through 2023 shows that $10,000 invested in the S&P 500 would have grown to $129,866—a compound annual return of 9.59% despite numerous market corrections and recessions during that period. That’s a difference of over $91,000 compared to the savings account approach.

Older investors approaching retirement often shift toward more conservative investments—CDs, bonds, and guaranteed products—because they cannot afford significant losses before needing to access their funds. By starting your retirement savings early, you capture decades of higher-growth potential that becomes unavailable as you approach retirement age. This flexibility is a major reason why it’s important to save for retirement in your younger years.

Starting Early Means Lower Monthly Stress and Higher Success Rates

Perhaps the most underappreciated benefit of early retirement saving involves psychological and practical peace of mind. When you begin in your 20s, you can achieve substantial retirement goals with surprisingly modest monthly contributions.

Let’s say your target is $1 million by age 67, earning a 5.00% annual return:

• Starting at 20: $456 per month
• Starting at 30: $799 per month
• Starting at 40: $1,485 per month
• Starting at 50: $3,141 per month

The numbers reveal an uncomfortable truth: delay retirement saving by just one decade, and your monthly obligation nearly doubles. Delay it further, and you face impossible choices—potentially foregoing other financial priorities, reducing your retirement goal, or working longer than planned.

Those who start early avoid this trap entirely. Smaller contributions distributed over 40+ years feel manageable alongside other financial responsibilities. You can simultaneously pay down student loans, save for a down payment, and build retirement security without feeling financially overwhelmed.

Building Your Retirement Savings Strategy Today

If you’re convinced that it’s important to save for retirement, financial experts typically recommend allocating at least 15% of your gross income toward retirement accounts. This can include contributions to employer-sponsored plans like 401(k)s, SIMPLE IRAs, and similar vehicles. Some advisors include employer matching in that 15% calculation, while others recommend 15% plus whatever match your employer provides.

If 15% seems unattainable right now, start smaller—perhaps 5% or 10%—and increase your contribution percentage as your income grows or life circumstances change. The key isn’t hitting a magic number immediately; it’s establishing the habit of consistent saving and allowing compound growth to work in your favor.

Consider these practical first steps: If your employer offers matching contributions on retirement plans, enrolling should be your priority. This is essentially free money toward your future. Next, evaluate whether you can redirect even small amounts—$50, $100, or $200 monthly—into additional retirement savings outside employer plans. Over decades, these amounts compound significantly.

The Regret Avoidance Strategy

The Voya Financial survey data revealing that 64% of Americans regret not starting earlier isn’t just a statistic—it’s a warning. Those workers in their 40s, 50s, and 60s cannot reclaim the decades of compound growth they missed. They cannot recapture the years when they could have invested in higher-risk, higher-growth assets. They cannot return to the era when smaller monthly contributions felt manageable.

By understanding why it’s important to save for retirement, and more critically, by acting on that understanding while you’re young, you position yourself to retire comfortably without the stress, sacrifice, and regret that befalls those who delay. Your 20s and 30s aren’t too early to think about retirement—they’re the only time when the mathematics of compound growth truly work in your favor. Start today, even with small amounts, and let time do the heavy lifting for your financial future.