When Should I Start Investing for Retirement?

The question of when to start investing for retirement has one of the clearest answers in all of finance: as early as possible. The mathematics of compound interest make the starting date one of the most consequential financial decisions you will ever make, far more important than which specific stocks you pick.

Warren Buffett bought his first stock at age 11 and later joked that he started too late. While this is partly humor, the underlying mathematics are deadly serious. Consider two investors: one starts investing $500 per month at age 25, the other starts the same amount at age 35. Assuming a 9% annual return, by age 65 the early starter has approximately $2.3 million while the late starter has approximately $920,000. The ten-year head start -- contributing just $60,000 more in total -- resulted in $1.4 million more in wealth. That is the staggering power of compound interest.

Charlie Munger describes compound interest as the most powerful force in the universe, and understanding it deeply changes how you think about time and money. Each year you delay investing is not simply a lost year of contributions -- it is a lost year of compounding, which grows exponentially more valuable as time passes. The first dollar you invest is your most powerful dollar because it has the most time to compound.

But what if you are reading this at 40 or 50 and have not started? The second-best time to start investing is right now. Howard Marks emphasizes that the biggest mistake is not starting late -- it is never starting at all. An investor who begins at 45 with aggressive savings still has 20 years of compounding ahead of them. That is enough time to build meaningful wealth, especially if they avoid the catastrophic mistakes that destroy portfolios.

For late starters, Buffett and Munger offer practical wisdom. First, increase your savings rate dramatically. If you cannot save 15% of your income, find ways to reduce expenses. The gap between what you earn and what you spend is the single most important variable in building wealth. Second, avoid the temptation to take excessive risk to "catch up." Investors who feel behind often make aggressive bets that end up setting them back even further. Third, maximize tax-advantaged accounts before taxable investing. The tax savings from 401(k)s, IRAs, and equivalent retirement accounts in your country compound alongside your investment returns.

Peter Lynch emphasizes that the key advantage of retirement investing is the extremely long time horizon. Over 20-30 years, stocks have historically returned 9-10% annually despite wars, recessions, pandemics, and every other crisis imaginable. This long horizon means you can afford to be invested primarily in stocks rather than bonds, which dramatically increases your expected return.

Your Action Plan

The Bottom Line

The bottom line is simple: time is your greatest asset in retirement investing, and every day you delay reduces the power of compound interest working in your favor.