Looking Back: Saving for Retirement Early

Looking Back: It Pays to Start Early When Saving for Retirement


Written by John Rothans

Sep 22, 2021

Have you been putting money into retirement over the past 20 years or more? Good for you. But if you haven’t (or even if you have), it’s wise to review basic retirement math and reiterate why—even if you’ have money put away—it’s essential to start saving for retirement as early as possible.

We’ll show how much your wealth can grow when you start early and give you information about including a self-directed precious metals IRA as part of a diversified retirement portfolio.

Retirement Balances on the Rise

Americans are tucking away more money for their retirement.

As of June 30, 2021, the balance in the average 401(k) account at financial services provider Fidelity had climbed 24% versus the same time in 2020. Meanwhile, the average balance for an individual retirement account (IRA) at Fidelity rose 21% during the same period.

Even so, more than half of Americans don’t have access to a workplace retirement plan. And of those who do have access, many feel they haven’t stashed enough to retire comfortably.

Why You Should Start Saving for Retirement Early

You’ve heard that the early bird gets the worm. When it comes to retirement, the early bird typically gets the biggest nest egg.

Financial services provider Vanguard offers an example of just how smart it can be to start saving for retirement early.

If you put $1 in a retirement plan like a 401(k) or IRA at age 20, it could grow to $5.84 by the time you reach 65 (assuming an inflation-adjusted annual return of 4%). But the final figure shrinks the later you start stashing that dollar:

  • Age 25—$4.80
  • Age 30—$3.95
  • Age 35—$3.24
  • Age 40—$2.67
  • Age 45—$2.19
  • Age 50—$1.80
  • Age 55—$1.48

There’s a pretty dramatic difference as you age. Looking at it from another perspective, the long-term growth potential of $1 in the Vanguard scenario declines 75% from when you start at age 20 versus age 55.

This simple example underscores the importance of saving early for retirement: The sooner you start saving for retirement, the better off you’re likely to be once you’re ready to retire.

401(k) and IRA Tax Advantages

If you’re relying on a 401(k), an IRA, or both as tools for retirement savings, keep in mind that both offer tax benefits.

With a 401(k), a worker sets aside part of their pay before federal and state income taxes are withheld, TurboTax explains. “These plans save you taxes today: Money pulled from your take-home pay and put into a 401(k) lowers your taxable income, so you pay less income tax,” according to TurboTax.

For a 401(k), taxes kick in when funds are withdrawn.

The tax situation for IRAs differs based on what type of IRA you have:

  • Contributions to a traditional IRA may qualify for tax deductions. However, withdrawals during retirement are taxed as income.
  • Contributions to a Roth IRA are not tax-deductible. But contributions can be withdrawn tax-free at any time, and qualified withdrawals made in retirement are tax-free.

Precious Metals in an IRA

If you set up what’s known as a self-directed IRA, you can contribute alternative assets like precious metals. Therefore, you can essentially transfer part of an existing IRA into a precious metals IRA.

Not only can this move diversify your portfolio, but it can also give you an alternative to a 401(k) if you’ve already reached your annual limit for 401(k) contributions. The limit for 2021 is $19,500. If you’re 50 or older, the limit jumps to $26,000.

Are you on track to retire when you want and with the funds you want? A precious metals IRA may be able to help you get there, especially if you’re one of the wise Americans who’s maxed out your 401(k).


Sign up now for latest executive insights and latest news delivered right to your inbox.

  • This field is for validation purposes and should be left unchanged.

Related Articles

Start diversifying today


As one of the largest distributors of precious metals in the nation, U.S. Money Reserve gives you access to our highly-trained team.

U.S. Money Reserve Gold Kit and Global Gold Forecast Special Report Thumbnail
The Ultimate Guide

Free Gold Information Kit

Sign up now to receive the ultimate guide to gold ownership, unlock special offers, and more.