What is one benefit of starting retirement savings early?

Starting retirement savings early is beneficial primarily because it allows more time for compounding to increase your savings. Compounding is the process where the earnings on an investment generate their own earnings over time. When you begin saving early, not only do you have more contributions making up your overall savings, but you also allow the investments to grow over a longer period. This means that the interest earned on your initial contributions will start to earn interest as well, leading to exponential growth of your savings.

For example, if someone invests a small amount early on, that investment can grow significantly more over 30 or 40 years due to the effects of compounding. As the investment compounds year after year, the total amount can far exceed what someone might have if they started saving later, even if they contribute more in later years.

The other options do not accurately capture the fundamental advantage of early savings. Interest rates can fluctuate and are not always guaranteed to be higher in the long term. Access to government grants may depend on specific programs that not everyone qualifies for, and contribution limits can vary but are generally standardized based on an individual's age or account type rather than being reduced specifically for starting early.