Delaying Saving for Retirement Has Big Price Tag

Postponing Saving for Retirement by Five to 10 Years
Could Reduce Retirement Income by Nearly a Quarter

WASHINGTON, D.C. – The Insured Retirement Institute (IRI) today released new research showing that putting off contributing to a retirement plan, even for a few years, could greatly reduce a worker’s retirement income. IRI found that a worker contributing 10 percent of income annually to a retirement plan beginning at age 35 – rather than age 30 – will receive 11 percent less in annual retirement income. Over the course of a 25-year retirement, the reduced income adds up to $62,000. If saving for retirement is postponed to age 40, income will be reduced by 23 percent, totaling $127,000 over a 25-year retirement.

“There’s no lost and found for retirement savings. When saving for retirement is delayed, the benefits of compounding interest are gone and can never be reclaimed,” IRI President and CEO Cathy Weatherford said. “Delaying retirement will only partially recover lost savings and may not even be feasible for some workers. And those who believe they can simply save a higher percentage later on will be in for sticker shock when they realize how much of their income will need to be dedicated to retirement savings to make up for lost time. Few workers can afford to contribute 25 percent, 35 percent, or even more of their annual income to their retirement plans.”

Other key findings from the report

  • A worker who starts to contribute to a retirement plan at age 35 would need to save 16.5 percent of annual income to have the same amount of retirement income at age 65 as a worker who started contributing 10 percent annually at age 30. If the worker delays contributing to the retirement plan until age 40, he or she would need to save more than 26 percent of income annually to achieve the same level of retirement income at age 65.
  • Delaying retirement can grow savings through additional annual contributions as well as investment earnings. A worker who begins saving 10 percent of income annually at age 30 can increase his or her retirement income by about 73 percent by delaying retirement and annuitizing at age 70, rather than age 65.
  • Delaying retirement can help offset some reductions in retirement income resulting from postponing savings. A worker contributing 10 percent of income annually to a retirement plan beginning at age 35 – rather than age 30 – will receive 7.6 percent less in annual retirement income at age 70, compared to the 11 percent reduction experienced if retirement begins at age 65.


Key Findins & Analysis

  • The retirement savings “window,” the period of time over which one can realistically
    expect to save for retirement, has shortened considerably as young Americans enter the
    workforce later and thus begin contributing to retirement plans at older ages.
  • The average age at which young workers reach the median wage has increased from
    26 to 30 since 1980.1
  • A worker with annual income of $42,000, approximately the median wage and a
    level of income associated with financial independence2, and saving 7% of income
    plus a 3% matching contribution, beginning at age 30 in a 401(k) or other defined
    contribution plan may be able to generate lifetime income of $22,467 in today’s dollars
    from the plan account balance at age 65.
  • The same worker waiting until age 70 would be able to generate $38,829 in
    annual income in today’s dollars, due to the additional 5 years of contributions and
    investment earnings, 72.8% higher than if income began at age 65.
  • At a 12% savings rate plus 3% match, potential income at age 65 in today’s dollars would
    be $33,700; at age 70 it would be $58,244.
  • A worker putting off saving until age 35 would need to save more than 16% of
    income annually to produce the same potential retirement income at age 65 as
    someone who started saving at the 10% rate beginning at age 30; starting at age
    40 would require saving more than 26% of income.

The powers of starting to save at young ages

One of the most powerful retirement planning decisions a younger worker can make is to contribute as much as possible, at as young an age as possible, to a retirement plan such as a 401(k). Contributing over a longer period of time increases the total amount contributed and maximizes the compounding of investment earnings and interest. The two charts below illustrate how potential retirement income is impacted by delaying contributions to a 401(k) or other deferred contribution retirement plan.

The charts are based on the following assumptions:

  • Annual income at age 30 of $42,000
  • Annual income increases at 3% annually
  • Annual retirement plan employee contribution rates of 7% and 12% of income
  • Employer match equal to 3% of annual income
  • 7% annualized investment return
  • Future plan balance discounted at 3% to express lifetime income in today’s dollars
  • $66.00 in annual lifetime income at age 65 per $1,000 of discounted plan balance; $76.80
    per $1,000 at age 703


The entire report, “It’s Time to Save for Retirement,” is available HERE.






About the Insured Retirement Institute: The Insured Retirement Institute (IRI) is the leading association for the retirement income industry. IRI proudly leads a national consumer coalition of more than 30 organizations, and is the only association that represents the entire supply chain of insured retirement strategies. IRI members are the major insurers, asset managers, broker-dealers/distributors, and 150,000 financial professionals. As a not-for-profit organization, IRI provides an objective forum for communication and education, and advocates for the sustainable retirement solutions Americans need to help achieve a secure and dignified retirement. Learn more at