Carrots and Sticks – HumbleDollar

Delaying saving for retirement is a bad move.

Here is a simple example. Assume you invest $1,000 at age thirty and not a penny more for 35 years You will then have $7,686. However, if you delay investing for 20 years, you will need to invest $3,200 to have the same $7,686 at age 65.

Young workers should max their savings as soon as possible even if they must cut back during middle age. Let your money work for you.

A recent study by The New School’s Schwartz Center for Economic Policy Analysis found that, among middle-class workers and their spouses currently age 50 to 60, as many as 40% risk falling into poverty or near poverty once retired. Many folks, alas, put off saving for retirement or suffer financial misfortune during their working lives, so they desperately need to stay in the workforce and earn more money to amass a decent-size nest egg. That creates financial stress that could have been avoided if they’d started saving at a much younger age—and it means they miss out on the sense of wellbeing that comes with controlling how you spend your days.

Source: Carrots and Sticks – HumbleDollar


  1. Myths about saving and investing. The example you show is based upon a 6% annual return for 35 years and the same return for 15 years 20 years later. The problem I see is that it focuses on absolute numbers and doesn’t account for inflation and the value of money (buying power). Saving is foregoing spending for a future time. Investing is risking savings in hope for a return which is higher than inflation. If I invest savings regardless of the period and get a return that equals inflation, I am in the same place as I would be if I put my savings in my mattress during a period where there was no inflation. Investing is only beneficial to the degree that the return exceeds inflation. I’m not saying that saving and investing for retirement isn’t important, it is. I’m just saying that static examples can be misleading. The true benefit of starting early is the compounding effect of the difference between inflation and investment return.


    1. No doubt you are correct, but the point I was trying to make was only that the sooner one saves the easier it will be to meet the goals you stated.


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