Why is it important to start saving for retirement early? How Small Savings Can Make a Big Impact

Retirement starts long before you stop working.

The earlier you start saving, the more time your money has to benefit from potential growth and compounding. That's why starting early matters. Consistent saving today can help you build greater financial security, confidence and flexibility in the future.

Where should you start?

Industry experts recommend setting aside 15% of your income (a combination of employer and employee contributions) into your retirement account every year. If that number seems daunting, you’re not alone: Many employees find it challenging to make that commitment at the beginning — so they work up to it!

Ideally, start by saving at a rate high enough to qualify for your organization’s full matching contribution. Then, commit to raising your contribution rate by at least 1% or 2% every year until you reach your contribution goal. Even if your employer does not offer a match, you should still strive to contribute a percentage of your salary instead of a flat dollar amount.

Annual Increases can make a big impact since you are saving and investing!

Just ask Flat-Dollar Fred, Percentage Patty, Increasing Irene and Saver Steve — four employees who started saving at the same time but had contrasting results due to different saving habits.

Flat-Dollar Fred simply saved the same, flat dollar amount with no increases over time and no regard for inflation or salary increases.
Percentage Patty set a fixed contribution rate of 5% but never considered increasing her percentage year-over-year.
Increasing Irene set an initial 5% savings rate but increased her savings by 1% each year until she eventually reached 15% (comprised of her personal and employer contributions).
Did you notice the large margin between Patty’s and Irene’s account balances at retirement in the graph below? Percentage increases can make a difference!
Saver Steve started strong with an outstanding 15% savings rate thanks to his personal and employer contributions and stayed there for the long haul.

Make it a goal to increase your contribution rate and take advantage of available employer matching to maximize your contributions as early as possible in your career.

For illustrative purposes only. This is not representative of actual investments or specific asset allocations. The asset allocation that you choose will depend on your financial goals, investment time horizon and risk tolerance.

To keep yourself on pace like Increasing Irene and Saver Steve, use milestone events like these as reminders to increase your retirement contribution percentage:

Increase your contributions each time you receive a pay raise, bonus or promotion.
Increase your contributions as you pay off debt, such as a credit card or automobile loan.
Create an annual reminder on your calendar, computer or phone to prompt you to review your balance and increase contributions yearly.

Since your savings are not just going into a savings account but a retirement investment account, they may enjoy the potential of compound growth. Compound growth is the earnings on both your original investment and any earnings your account generates. This means your earnings can generate additional earnings, helping your savings grow faster over time.

The earlier you start saving for retirement, the more compounding may benefit you. In the above example, it’s important to note that each character started saving something as soon as he or she could — although we should all work towards Saver Steve’s saving habits.

But retirement success isn't determined solely by when you start or how much you save. How you save matters, too. Compounding works best when it's paired with smart retirement savings strategies.

Tips to Get More from Your Retirement Savings

Invest appropriately.

It's important to make sure your portfolio is composed of investments that best align with your retirement goals and risk tolerance. Review our three investment approaches and see which option might be best for you and your investment goals.

Simplify account management.

If you have accumulations from a previous employer's plan or an IRA, consider rolling them over to your employer retirement account. By consolidating your accounts and streamlining finances with one provider, you may save time and effort tracking your investment progress against your goals.

Advisory Services

Don't want to do it yourself? We offer a range of financial planning services, tailored investment strategies and ongoing investment management for those looking for a higher level of service. Learn more.

Start Small and Don’t Give Up

Saving for retirement regularly takes self-control, but today's discomfort pales in comparison to future regret. A long-term perspective can motivate you to make small sacrifices today and stay on track toward a comfortable retirement.

Ready to get started?

Log into MyGuideStone^® to review and update your contributions.

For more information, contact us at Info@GuideStone.org or 1-888-98-GUIDE (1-888-984-8433), Monday through Friday, 7 a.m. to 6 p.m. CT.

This information is provided for educational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities and does not represent any GuideStone product. The information is not intended to be used as a general guide to investing, or as a source of any specific investment recommendations and does not take into account the particular investment objectives, restrictions, tax and financial situation or other needs of any specific client. This is not an implied or express recommendation concerning the manner in which any client’s account should or would be handled, as appropriate investment strategies depend upon each client’s individual preferences and circumstances.

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Be sure to consider all of your available options before rolling over your retirement assets. It is important to consider all of the potential advantages and disadvantages of rolling over your retirement assets to an IRA, including the different investment options that are available to you as well as the services, fees, expenses, withdrawal restrictions and tax consequences of rolling over your assets to an IRA. Other options are available besides rolling over your employer-sponsored retirement plan, including leaving the account with your previous employer. An employer-sponsored retirement plan may offer advantages investors can’t get if they roll the money into an IRA or employer-sponsored retirement plan.