35% of American workers feel significantly behind when it comes to their retirement savings

Investing early is the most effective way to ensure your retirement savings stay on track, according to Americans.

This insight comes from CNBC’s August 2024 Your Money retirement survey conducted with SurveyMonkey, which revealed that just 37% of non-retired Americans feel they are “on schedule” or “ahead of schedule” with their retirement savings.

With over half of Americans reporting they are behind on retirement savings, catching up can seem daunting. However, among those confident in their savings, 42% attribute their success to starting early. Other key factors cited include low debt (38%), wealth from homeownership (37%), good saving habits (35%), employer-sponsored retirement accounts (35%), and high income (32%), among other reasons. Respondents were allowed to select all applicable factors.

Here’s why investing early has such a significant impact and how you can build the habit while young.

The Power of Compound Interest

A recent Morningstar study found that 79% of Americans who will participate in an employer-sponsored retirement plan, such as a 401(k), for at least 20 more years are likely to accumulate enough savings to last through retirement.

Early contributions to retirement accounts often form the foundation of a person’s wealth, largely due to the benefits of compound interest. This process allows money to grow exponentially, as interest is earned not just on the initial investment but also on accumulated interest.

“It’s the true secret to success in the stock market,” says Marcus Holzberg, a certified financial planner in California.

For example, Holzberg illustrates how starting early pays off:

• A 25-year-old contributing $100 monthly to a retirement account with a 5% return, compounded monthly, would see their investment grow to approximately $152,000 by age 65.
• If they started at 35, the total would shrink to about $83,000.
• Waiting until 40 would reduce the amount further to just $60,000—less than a third of the value of starting at 25.

The earlier you begin investing, the greater the benefits of compounding, making early contributions a cornerstone of successful retirement planning.