This story is part of the CNBC Make It's One-Minute Money Hacks series, which provides easy, simple and basic tips and tricks to help you understand your finances and take control of your money.
When investing in retirement, experts recommend focusing on huge goals like consistently saving 15% of your take home salary and managing to save a total of 10 times your final salary by 65. But if you are n't able to dedicate 15% of your earnings right now to retirement savings, that's OK.
The important thing is to start saving what you can as soon as possible. Starting early is key because it allows you to take advantage of compound interest, which is when you earn interest on both the principal amount and any accumulated interest.
If you invest$ 100 and earn 5% interest, you 'll have$ 105 at the end of the year.
With simple interest, you could continue to earn 5% of that$ 100 every year. With compound interest, you earn money based on the total amount of money in your account, not only your contribution.
That means you will now earn 5% of$ 105 and so on; Let's see how that plays out with your retirement savings. You earn$ 50,000 a year, if you contribute 5% of your pre-tax salary per year and earn a 6% rate of return, which is about the market average, you 'll have almost$ 15,000 saved up after 5 years.
After 10 years, this$ 15,000 will be withdrawn at about$ 34,000 and after 20 years, you 'll have almost$ 97,000 in your possessions. If you want to work towards reducing the recommended 15% of your income, one trick is to increase your contribution every year by such a small amount that you never feel it even more. Let's say you increase your contributions to 6% of your salary- just 1% more.
After 5 years, you 'd have more than$ 17,000 saved, a$ 2,000 difference.
After 10 years, you 'd have around$ 41,000 saved and after 20 you would have almost$ 116,000 put away.
If you continue to increase your contribution by 1% at a time, you 'll gradually build up to the recommended 15%. Most providers allow you to set your contributions to increase automatically so they 'll automatically increase each year. You can also add to your contribution manually every time you earn a raise.
And you might not have to contribute the entire 15% themselves; many employers provide a dollar-for-dollar match on your 401 contribution up to a certain limit. Check out: Meet the middle-aged millennial: Homeowner, debt-burdened and turning 40. Do n't miss: This 33-year-old entrepreneur earned$ 226,000 in San Francisco-here's how she spent her money.