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It pays to save for retirement, provided you live to see it. Saving for retirement early increases your chances of seeing it while also maximizing your enjoyment of it.

There are always risks in life, saving for retirement is one of them. You could conceivably save all your life and forego the present on the hope of being extremely wealthy later only to find you cannot withdraw on your savings because the market has crashed. You could even die.

If die, it was obviously a waste, unless you find some satisfaction in leaving your retirement earnings behind for someone else to enjoy. That can be rewarding enough. If the market crashes, you may need to postpone your retirement or risk outliving your retirement by having to tap into too much principle to sustain a minimum standard of living. Which may not seem so bad, except that you may have postponed many things up to retirement in hopes to do when retired but are no longer able to.

This could also happen if you become ill during your retirement. You may have amassed fortunes but are unable to use it. All the sacrificing earlier on for the later dream could be for nothing. Then again, those savings could very well end up being the only thing keeping you out of a nursing home making it worth while to have saved.

Saving now can help you reach retirement earlier, and reduce the chance of wasting time in saving. The younger you are when you retire, the greater chance you have of enjoying it. Determine how much you need to retire on and work towards it.

Suppose you can live comfortably on $50,000 a year. As a general rule, you need to save up twenty times that amount. So $50,000 X 20 = $1 million. With this amount of savings, you can retire and withdrawal $50,000 from your savings every year for the rest of your life, no matter how long you live, if the stock market continues to average 11-12% per year as it has for nearly a century.

How quickly can you get to $1 million, depends on you. Keep in mind, if your 401k or 403b plan is your only means of retirement savings, you wont be able to draw on it until age 59 and a half without incurring penalties. If you wish to retire earlier than that age, you will need other non-tax deferred investments to carry you until that age.

Just to give you and idea of how quickly you can become a millionaire, consider the following annual investments with a 10% rate of return: $2,500 for 38 years, $5,000 for 31 years, $7,500 for 28 years, $10,000 for 25 years, and $15,000 for 21 years. In 2007 and, the IRS allows an annual investment of over $15,000/year in a 401k plan. Thus a person could conceivably start investing at age 40 the maximum amount allowed and still reach $1 million by age 60 when withdrawal can begin without penalty.

This is not a recommendation to wait until age 40 before starting. Starting earlier means more principal in the end ($1 million may not be enough by age 60 due to inflation). Using other investments outside the tax-deferred plans means the possibility of retiring before age 59 and a half allowing retirement to occur earlier the 50's or perhaps late 40's, depending on what one can afford to invest and how well it performs.

Life has no guarantees; therefore one must make the assumption of living healthy to a ripe old age. An age where no one wants to spend it as a greater in an outlet store or flipping burgers, so prepare to avoid it. Keep it balanced though to ensure you are enjoying life now, incase life ends or incapacitates you before retirement.

Learn more about this author, David Kramer.
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