By Andrew Neitlich

How’s your retirement looking?

By Andrew Neitlich

My understanding is that there are lots of young people who visit Sitepoint, people in their teens and twenties.

I hope that you save 20-50% of every dollar you earn.

It may seem hard with rent and food — but it only gets harder later on.


If you start saving now and investing wisely, you may be able to retire long before your colleagues.

I won’t bore you with a lecture about how money compounds, and how $1 saved in your twenties can be worth lots more than $1 saved when you are 40 or 50. You know that.

Why do we work? Lots of reasons. But work is about how we use our life energy, and what we do with that energy. If you want to be able to choose whether you work or not someday, please start saving up now — in a big way. It takes discipline and commitment, but is worth doing.

Please read the classic book Your Money or Your Life if you want to learn a new way to think about money. Read also The Automatic Millionaire, so you can see the powerful effects of saving.

I’m lucky in that I saved enough money early on and made some smart investments in real estate and stocks — as well as my own businesses. I hope you are equally “lucky.”

Take a moment and figure out how much you need to save every month to have $2 million by the time you are 55. Then start saving that amount.

  • Gonjiness

    I think one of the problems is that we see cover stories like “How This Kid Made $60 Million in 18 Months”, and everyone wants the (nearly) instant gratification, that is to get rich quick.

    Andrew, although your plan always works if planned correctly, it seems that people would rather go for the long shot that doesn’t have great chances of succeeding over something easier than shooting fish in a barrel.

    Why? Because the long shot is more exciting! It gets your blood flowing! Imagine the stories you can tell!

    I am in agreement with you though (I have been saving for retirement since high school).

  • Dread_

    I’m 20, if i want to have $2m by the time im 55, i need to save $156.55 EVERY single day up until then. That is quite scary when you look at it like that.

    In reality, i’d be comfortable retiring with $100,000 in the bank, which is only $7.82 a day, which seems acheivable along with securing a house without a mortage by that time too.

  • Dread you are actually wrong. Look into what compound interest does and how just putting a little away now can mean GOOD money when your older (even just 10 years from now).

  • Dread_, you only need to save $156.55 every day if you’re stashing the cash under your mattress. You need to account for the compounding of interest, which is the whole point of Andrew’s advice. The money you save today will be worth significantly more after accumulating interest for 35 years.

    Assuming an average interest rate of 6%, you could save $2 million by age 55 by putting roughly $1400 per month ($46/day) into a tax-deferred account.

    Of course, since you’re young you can invest that money more aggressively in growth focused mutual fund. Get a return of 9% annually, and after 35 years you’ll have the $2mil with an investment of just $700 per month ($23/day).

    Starting to sound more plausible? It’s all about investing for the long term, preferably through a tax-deferred account.

    Here’s an online calculator if you want to play around with some more numbers:CNN Money – Savings Calculator

  • Just wondering.. Where do you get intrest rates of 6% these days?

    The other problem that you need to take into account is devaluation of money..

  • Invest your money in Australia and you’ll get close to 6% almost anywhere…


    Just a comment to “Dread”. If you’re 20 now and plan to retire with just $100K in the bank and a house, I don’t think you’ll be comfortable, especially if you plan to retire at 55. Chances are you’re going to live until you’re 90 odd. With $100K in that bank and even earning decent interest that would leave you less than $5K each year to live off for your remaining 35 years. To put it in perspective, with inflation that’s around about $1,000 a year in today’s money.

  • Art

    Any international options for investment?

  • vmihaylov

    I also think that one has to start saving money his retirement as early as possible. But perhaps it would be better in your twenties to invest in yourself ? than in stock. What I mean is that at that age one is can get better ROI from education than from stocks. What do you think about that?

  • Anonymous

    I’ve increased the amount of money that is put into savings automatically each month. Even though I felt like I couldn’t afford to do it, I realized that a dollar invested now is worth so much more than a dollar that I put away when I’m 40 or 50 – because of interest.

    Also, people talk about retiring at 55 or retiring young. Are you really going to do that, though? I imagine that unless I’m sick, I’ll always be doing something. When I hear people say that I imagine that they don’t enjoy what they do or else they’ll actually have enough money to live an exciting life of travel and adventure. Two million isn’t going to get you there. Two million will barely cover living expenses for 30 years, let alone fund a life of travel. My mom retired two years ago at 58 and she’s bored already! My parents took some great vacations this year, but it still only amounted to about one month of travel. Now she’s looking for volunteer work or a part-time position.

    I enjoy what I do and my goal is to make the right financial decisions now so that I’ll have the financial security and freedom not to retire at a young age but to choose jobs that I enjoy rather than jobs that I have to do in order to pay the rent, medical bills, etc…

  • acecream

    Its much more simplier then this. All what you need is to save up 500.000$ in about 10 years and then you head up to casino. You bet all your money no black and you double it in a minute. Then you put whole million no the red (red comes after the black naturaly) and you got yourself a fancy 2million dollars. Then you go to a car shop and buy a brand new porsche. :)

  • jOOOL

    I’m one of thoose young people you mentioned. I live in sweden and here ordinary bank accounts has about 0%-0.2% intrest rate. If your willing to lock the money for x numbers of months or years and have at least 6.500-12.500$ saved you can get a intrest rate of between 1.25-2.5%. That’s not very good is it? I looked in to funds but they cost 0.8%-1.8% of your invested money every year. They charge you for removeing you money too. I find it hard to belivie that I can find a found that increases it’s value by the 7% needed to give me an intrest rate of 6%, not at average during a number of years. Or do funds do that?

  • aneitlich


    Check out any number of funds, most of which return 7-9% per year. There’s risk, but over the long run that’s there return. You have to put the money away and think long term, and not worry about market dips.

    Get The Automatic Millionaire by Back.

    And, for low cost index funds, check out the leader, http://www.vanguard.com. You can get a prospectus for any fund and see their annual returns for yourself.

  • stridox

    I’m 16, and always stash a good portion of everything I make in the bank; I’m taking advantage of my parents so all I pay for are for personal things like going out with friends, maybe even a console game every now and then. I know I won’t be able to do this once I’m out of high school, but oh well; I have a lot more saved up than most people I know, so it should’nt be too rough.

  • pdxi

    I’m currently trying to save six months’ worth of income. After that, I will begin to save for retirement.

    One thing at a time!

  • Excellent blog here Andrew. Only recently I’ve been looking at taking better care of my money. I’ve graduated from uni without any debt and only recently opened a Savings account, High Interest Current account, a Mini Cash ISA (tax free), and purchased some Bonds.

    I want to start looking for a mortgage soon so most savings will be eaten up by putting down a deposit but from there the saving will hopefully begin.

  • GreenBoy2000

    Andrew – wish I had some advice like this when I was in my teens – being on a web site where I like to visit, makes the info more apetising.

    When I was that age (long long ago) the only advice available was your parents or a grey man in a grey suite at the bank… and what teenager is ever going to listen to them?

    This is a good and simple plan, and the younger members should try to impliment it, if nothing else take me as an example of what not to do..

    I went to college and got qualifications.. thinking that this would be a good investment in me (a great ROI, you might say) – unfortunately at the end of the course I realised it was something I was not so interested in after all (amazing how college can suck the fun out of something) and then due to the volatile nature of the inductry I was in went from job to job to job only getting minimum pension provision, with some gaps in between (I worked in contruction, which in terms of volatile short term projects is not so disimilar to IT I would say?) I now work in another industry which is a little more stable, and can now make better provisions however…I am looking at not being able to afford to retire without making some massive changes to my finances – which is and will continue to be painfull right up to the last….

    So – plan early.

  • anon

    I am completely negged out and depressed at the fact that i have no savings and my finances are in a mess. i’m generally a sloppy, lazy person who can never get round to paying the bills.
    if disorganisation was an olympic sport, I’d be bringing home the gold for england every time.
    usually Andrew’s blogs fill me with vision and hope for a bright future, but today’s blinding flash of honesty has dangled me over the cliff of despair.
    I know i have to do something about it, and i might even pretend that ‘today i’m going to do it’, but i know at the end of it all i’ll just leave it til tomorrow…

  • JamieJelly

    remember you are losing money if you put money aside whilst you have debts. The interest rates you earn on your savings are a lot less than that you pay on your debts. Clear debts then save.

  • Entriple

    Although the logic behind this arguement is always pushed by various media sources, it always fails to demonstrate exactly how much inflation will occur on the dollar in that time. By the time you hit 55 that $2 million is going to look more like a small bank loan. By the time I am 55, the average ammount to give a kid for pocket money will be $2,000/week. If savings where such a sure thing more larger companies would do it, the key is in liquid money and investing (and not in an overpriced house to live in).

  • EvilIvy

    I know I should save, I’ve read all these posts and I agree it would be nice to have money when I retire, BUT I don’t know how to make a go of it.
    Here’s my boat… I’m 33, make only $1050.00 take home per month. Rent and bills come to $911.00, which leaves me with $139.00 for food (a must), and transportation (again to make the measley $1000) a must.
    Being out of the home at an early age and not having an opportunity (or money) to be formerly educated, I find myself unable to make a better wage. How am I to save anything?

    I refuse to believe I am the only person that can’t afford to put away “only” $23/day.

    Any suggestions for the poor folks out here?? In Canada we have Old Age Pension, but our government has been very adament in letting our generation know it won’t be there for us when we hit retirement. Looks I’ll be working until they put me a wooden box!

  • EvilIvy: You are of course, not poor. You have not seen poor :), trust me friend. And one of the best ways to save more, I figure, is to plan implement tweak plan implement tweak to earn more! You did not factor that in your post… You earn 1050, doing what? What options you’ve got to increase the earnings just from what you do? The questions are as varied as the options, dont you think?
    best of luck btw, God’s peace!

  • Anonymous

    EvilIvy, you think you are poor? come to Africa and see. I am 30 year and educated in an American unversity. I have no job and still live with my folk. I bought a copy of david bach book 2yrs ago. I loved the principle in it but can’t put it into practice because i have no income.

    Recently, i tried to get a broadband internet connection to my home so that i can start up an online business. Guess how much it cost? A kool $1000 USD just to set it up and $60 USD every month. How much do you pay to blog?

  • Bruno

    im 19 I want to retire with 500.000 usd and i want to know how much i´ll have to pay if i want to retire with 55

  • Financial Hostage

    EvilIvy – While it is incredibly difficult to work through your situation it is not impossible. It will require hard work and dedication on your part. For you College is the key. You do not need money in order to attend College, there are several other options to help.

    1.Loans – You can get financial aid which does need to be paid back, but it does not need to be paid back until after you graduate and typically has a very reasonable interest rate.

    2. Grants – Check with your local educational institution to see which Grants are available in your area and to you and which ones you qualify for. This is free money for you, it does not need to be paid back and there can be many many different qualifications for these from simply being a specific race, to a specific profession, etc…

    3. Scholarships – These usually require some sort of application often including a writing assignment of some sort. Again these are free money that do not need to be paid back but they have some specific requirements that must be met and you will typically have to compete with others for them.

    It is entirely possible for you to pay for your college education between grants and scholarships, if not you can always finance the rest but regardless you should check with your local College and they can help you look into what you qualify for(but ultimately you will need to do the work). Some will allow you to also use the money for living expenses etc… so you don’t have to work.

    Personally I worked full time and attended College, it was incredibly difficult but obviously I made it through :). You can easily double your income by taking this route, once you recieve and official education you will make more money at which point again you can start to look at how to invest for retirement.

    Bruno – Typically to answer your question you would take the law of 7’s into account. Basically what this says is that at a 7% interest for 7 years your investment will double. So you will need 250k by age 48, 125k by age 41, 62.5k by age 34 etc… This is of course assuming no additional contributions by you. The short answer is to put away as much as you reasonably can

    There are also some other advantageous aspects of the 401k that can be considered depending on your holder. For me I can pull a loan out on my 401k if needed without having to pay taxes(since it’s a loan and being put back in). Here is the upside to this. My financial institution always gives a reasonably rate(why wouldn’t they it’s my money) but the real kicker is that all interest from the loan gets paid back into my account. There are obviously some limits to what can be taken out etc… but say you wanted to buy a new car, you could simply pull the money out of your 401k to purchase the car and simply pay cash for the car, you will still have the loan but since it comes out of your 401k all interest is paid to YOU, not to some other financial institution. Since you are likely to buy a car anyways this is a great way to pay for it as though you were paying cash and still helping increase your 401k, without hindering your lifestyle in any way.

    It should also be noted that once you start to get into more reasonable jobs your employer will often offer some sort of employee contribution matching for your 401k investments. While this exact contribution varies it is a great way to again add free money into your 401k account(for most you will need to be “vested” with the company).

    Anyways, it is great advice to start early. I started earlier than most and while I am doing ok at the moment my math shows that I am still quite behind what I need to be at in order to make the 2 million goal by age 55. I guess it’s time to step up my investments again.

    Oh and for interest rates, you will find that banks are not where you should be looking for good returns on your investments. Find a 401k plan to work with, typically through your company. I also recommend looking at Vangaurd as they have done very well for me. But be sure you diversify your accounts. If you put all your eggs in one basket and the basket breaks you are screwed. Mix up your investments between high risk, medium risk and low risk, exact percentages will vary depending on the individual and the amount of time you have to work with.

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