We know we should have started younger. In fact, we know we should be doing more now for our retirement.
We have wasted the following examples on the youth: If you begin in your twenties and put away $5,000 a year, every year, faithfully until you retire, you will have a 401(k) worth in the neighborhood of about $700,000. Of course this also relies on a steady growth in the markets of at least 5%.
But what if you missed that initial decade? What are the chances of reaching that amount?
Since the vast majority of us missed that decade, how much more would we need to get it back? It is important to understand, this "invest in your twenties" adds the miracle of compounding to the mix. It allows markets to correct even as you are afforded more risky investments. What goes up in other words, really goes up and when it goes down, it doesn't fall as a far.
Older folks on the other hand, witness direct changes to their invested dollars when markets recede making the pain even more real. As the recent market downturn proved, the average investor had about two-thirds of their own money in their plan. Losing more than 33% of your account's value wiped out not only all of your gains, but also ate into the money you worked so hard to invest.
To make up the shortfall, sage advisers suggest that you invest more (raises, bonuses, etc. as soon as you get them), that you gradually increase your contribution to make up for those "missing years" and that you never let up. In works in theory of course and on any retirement calculator you might use. But in practice, you have to adjust to living with far less now to ensure you don't live on far less in the future.
To read more about how to get back that missed opportunity...