Most people when they finally get out of school and start their first job, are so happy with their financial independence and the first paycheck, that they splurge the entire paycheck, if not more. Few people think so far ahead about the next stages in life, of getting married, having a family, and eventually retiring from work. If one doesn’t plan to have children, then they have plenty of time to save for their retirement. But if they plan to have children, the best time for saving money is really right after schooling is over, and before having any children.

For the ease of this discussion, I’m going to assume some simplistic scenario. Let’s assume that a person named Kevin graduates from college at the age of 22. For the next two years, Kevin either spends another 2 years for graduate school studies, or simply lives from paycheck to paycheck because of little work experience which leads to lower salary. And after age of 24, to age of 30, Kevin develops the career, and gets married. At about the age of 30, Kevin has his first child. The first child goes to all the levels of schooling, and graduate from high school after 18 years. At that time, college expenses will start to kick in when Kevin is age of 48. Assuming that Kevin has two kids, separate by 3 years in age. So for the next 7 years, Kevin will need to help out college expenses for his kids. Once it’s over, Kevin is 55, and has another 10 years of working & saving money until his planned age of retirement at 65.

Now, let’s look back at the timeline of Kevin’s life in regards to earning and saving potential:

- From 0 to 24: it’s pretty much zero. At the end of 24, Kevin may have some or a lot of college debt.
- From 24 to 30: this is a time that he can potentially save some money (either towards paying down college debt, or just simply saving).
- From 30 to 48: Kevin’s earning may grow with experiences, but his expenses probably go up as kids grow up. Let’s assume that the increase in earning is offset by the increase in expenses. Actually in reality, expenses are a lot higher for the beginning years because the wife cannot go out to work. If the wife goes out working, the preschooling or daycare expenses may take up all of her paycheck. Either way, you end up with less (retirement) savings per husband and wife.
- From 48 to 55: I think we can safely assume that the saving will be zero or negative if Kevin decides to pay the majority of the college expenses for his children.
- From 55 to 65: This is another good 10 years of earning and saving, especially with Kevin’s long time work experiences.
- From 65 to 90: That’s 25 years of living expenses that need to be saved up (for both husband and wife).

So you want to tell me when Kevin can save for his retirement? To err on the conservative side, and for simple discussion, let’s assume that Kevin’s investment return is only on-par with inflation rate. So in terms of buying power, what he save every year will simply be what he can spend later. Depending on the ratio of Kevin’s annual saving to Kevin’s annual retirement expense, the entire retirement picture can look very different. If we assume that the sum of Kevin & his wife saving is about the same as their retirement expenses which will probably be more than $30000 every year, we can simply count the number of years of savings to find out how many years they can retire. And that’s 6 years from 24 to 30, 18 (or probably less) years of savings from 30 to 48, and 10 years from 55 to 65. That’s total of 34 years of savings for 25 years of retirement. Boy, I haven’t counted the college debt at the time of graduation, and I forgot about buying a house to live. But for the house, I would also count the housing equity as part of your saving, more in terms of the mortgage that you have paid down, and less in terms of equity due to the current high housing price. So you can “keep” part of your saving in the house, and reverse mortgaging your equity at the end. It’s almost like another bank account.

So with ratio of 1, that’s 34-25 = 9 years extra savings, either for your heir, or for your margin of errors, such as discounting the first 5 year savings when the kids are 0 to 5, or discounting for negative saving years when they’re in college. Now, if you have spent thru your paycheck from 24 to 30, you have just made your margin of errors to be pretty close to zero.

For singles, the scenario is much better. There are no kids to raise, nor kids’ college expenses to pay. All the increase in salary earning can go towards extra saving (& inflation), not counting the extra 7 prime years of age 48 to 55.

As for myself, my current saving rate is about $45K, and my estimated retirement expenses are about $31K, summing from my current budget, plus doubling the travel expenses and tripling the medical insurance and doubling the car insurance, and subtracting out any direct kids’ related expenses. I also add in property tax. My saving to retirement expense ratio is slightly better than 1, at almost 1.5.

If you want to put in all the details of your retirement planning, including the inflation rate and investment return, existing asset and liability, you can use my retirement calculator. You can use it to estimate when you can retire. It’s what I use personally, and it’s very comprehensive, yet simple.

Bottom line, it’s never too late to start saving now. It is far better to have some savings set aside already, then to worry about whether you can hit your retirement saving goal in time.