Balance Spending Now With Saving For Later

Get ready for big life expenses, including retirement, with these tips

- Kathy Kristof

WHEN IT COMES TO RETIREMENT PLANNING, timing is everything. You have to do some things as early as possible—like starting to put money away for retirement—but you also have to consider when to take on big pre-retirement expenses.

Those can include starting a family (with all the daily and college tuition expenses that entails) or starting a business. Perhaps you want to do both. But that doesn’t mean you should let your retirement planning slide.

“The key is to start saving early,” says Ric Edelman, co-founder of advisory firm Edelman Financial. “The earlier you start, the more compound interest can work for you.”

Indeed, if a 25-year-old saved just $250 per month, he or she could expect to have more than $1 million at retirement, assuming a 9 percent average rate of return. But a decade-long delay in starting that savings account would require that this individual save more than twice as much to have the same nest egg.

That’s assuming you don’t tap those savings. But surveys conducted by the small-business marketing firm Manta found that 66 percent of entrepreneurs use their personal savings to launch their companies, while some 34 percent of business owners have no retirement plan at all. Follow these steps to avoid making the same mistakes.

Postpone Parenthood if Possible 

You might not immediately think of this as a retirement strategy, but nothing makes saving early quite as simple as having kids late. Just ask Ross Gerber, co-founder of Gerber Kawasaki Wealth and Investment Management. At 46, he is the proud parent of two preschoolers, ages 5 and 2.

“Often the easiest way to tell if somebody is rich or poor is to look at the age they were when they started a family,” says Gerber. “The later you start, the better.”