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Saving for retirement can often feel like an uphill battle. It’s slow to gain momentum and often doesn’t feel worth it. With the average American carrying close to $4,000 in credit card debt, most people are barely treading financial water rather than saving money.

According to American Equity, nearly half of Americans, at any age, have no retirement savings at all.

So while we know that saving for retirement is important, it’s hard to stay motivated when progress is so slow. Why add more to your company 401(k) when there is credit card debt to payoff and not enough in savings to make a dent anyway?

This post will review why the first $100,000 is so difficult to save but also why it’s so important to achieve.

## How long does it take to save $100,000 for retirement?

To figure this out we need to make a few assumptions.

- Initial savings: $0
- Income: $60,000 annually
- Interest rate: 7%
- Employer contributions: 3%
- Employee contributions: 3%
- Total employee contributions: $1,800
- Increase contributions by 3% every year to account for raises and inflation

With these assumptions, it will take 14 years to save $101,000. Which isn’t actually too bad given that monthly contributions are just $150, with another $150 in employer matching

What would happen if you decrease your monthly expenses and increase your savings rate to 10% contributions? Assuming all other numbers are the same, it will now only take a little over 8 years to save your first $100,000.

## How long does it take to save $200,000?

Now that you’ve saved your first $100,000, how long will it take to save your next $100,000? Here is where the power of compound interest begins to take effect. It won’t take nearly as long as you’d think.

Assuming you are still saving the same 3% of your income, with employer matching contributions, it will take just over 6 years to reach a total retirement savings of $200,000. That’s less than half the time it took to save your first $100,000!

And if you save even more of your income, it will only take an additional 4 years.

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## How long will it take to save $300,000?

Since this exercise is so enlightening, let’s see how long it will take to save the next $100,000.

Again, assuming you are still contributing just 3% of your income, increased by 3% annually, it will now take just over 4 years to save an additional $100,000, making your total retirement savings a whopping $321,000 at year 25.

Remember, that’s with saving only $150 every month, or just $75 a paycheck.

## Compound interest over the years

If we look at a graph of just the interest earned over the years, you can see just how quickly your savings can grow with time.

If we take this out 40 years, meaning you start saving when with your first job and aim to retire 40 years later, the interest earnings alone look like this:

By the time you retire, around age 65, you will have contributed $135,700, your company will have matched that amount (for free!) and you will have earned $882,400 in interest. That’s 550% more than what you actually deposited.

Your account total will be over $1.15 million, which equates to roughly $46,000 in annual retirement income. This may not seem like enough, but you will likely also have social security benefits to fill in the rest.

It’s certainly better than nothing at all, which remember, is what half of Americans are facing.

## What happens when you save 10% of your income for retirement?

If we go back to the example above where instead of just 3% contributions you live below your means and save 10%, how much will savings grow?

After 40 years your account balance will be over $2.5 million. Assuming the 4% rule, this equates to an annual retirement income of $100,000.

You will have contributed roughly $412,000 over the 40 years of saving, your company will have matched around $176,000. To top it off, you will have earned over $1.9 million in interest.

Interestingly enough, by year 30, your balance will increase by over $100,000 every single year.

So now how long does it take to save $100,000? Less than a single year!

## Moral of the story

The first $100,000 is the hardest. After that, compound interest slowly kicks in and continues to massively snowball your savings ability over the years. The second $100,000 can be saved in half the time, and it only gets easier from there.

So do yourself, and your retirement savings, a favor. Take advantage of compound interest. Start saving as early as possible and don’t get discouraged. The next $100,000 will be so much easier to save.

## Related reading

**This is What Your Retirement Savings Needs to be at Every Age**