3 Underappreciated Benefits of Early Retirement Savings

“By instilling the principal of saving regularly from an early age, if done consistently, it will develop into a habit,” Crider says. “If one, instead, decides that they will begin saving at an arbitrary time in the future when they feel they are able to, one can easily succumb to lifestyle creep and never actually reach a point of ‘having the money to save.’”

Furthermore, savings rates are traditionally viewed as a percentage of income, rather than a flat dollar amount. Therefore, Crider says, establishing a percentage early on, while perhaps being uncomfortable at times, is a more manageable habit than feeling forced to save a specific dollar amount annually.

“This allows for fluidity as earnings rates shift,” he says. “Finally, one must simply consider the role that time plays when considering compounding. Saving, even a modest amount, from the onset of a career, allows for those saved and invested dollars to work for decades, reducing the burden of retirement income to be generated primarily through a higher savings rate later, and shifting it, instead, to the wondrous work of compounding.”

Less Lifestyle Disruption

Jarrod Sandra, owner and advisor at Chisholm Wealth Management, says quantifying an adequate standard of living across all human beings is a difficult thing to do. What one person would insist is a requirement for their standard of living is another person’s optional item, he posits.

“That’s why it’s called personal financial planning,” Sandra says.

In his experience, saving early in a career versus starting in the middle creates a lot less outlay in any given planning scenario.

“When someone starts to save for retirement in the middle of their career, it is likely going to disrupt their standard of living to accommodate that change,” Sandra says. “I think the more impactful route, painting with a broad brush, is to get a younger person to live within their means and have them focus on getting out of debt.”

Once the debt load is manageable, it is then time to start tackling the retirement issue.

“If they go this route, they learn to live on less than they make and reroute previous debt payments to investing for retirement and increasing their standard of living, all within their means,” Sandra says.