Retirement can be a daunting challenge for many people both young and old alike. When people are just starting their working careers, saving for a retirement that maybe 40 years away is the least of their worries. When you are in your mid-20’s you just got out of college and are worried about how you are going to pay your student loans much less save for something so far away. Then in your 30’s and 40’s you are worried about buying a house and paying for your children’s expenses. And finally in your 50’s and 60’s you are finishing paying for college for your children and maintaining the house you bought earlier that now needs possible major repairs. But no matter where you are in your life it is never too late to invest in your retirement future. And in many cases if you start early you do not have to save large sums of money. For assistance in saving for retirement seek out a Registered Financial Counselor or RFC to assist you in this endeavor.
Start before it is too late to make huge differences
The sooner you can start saving, the better off you will be, no matter what or how you approach this situation later in life. Why? Simple, compounding works in your favor and is a true wonder of the financial world. Compounding is when you invest a set amount of money into an account, and that money earns interest then that will be added to your principal and earn even more money, and it will continue to grow over the years. And the longer you allow the funds to grow the more you will end up saving. Sometimes, with little outlay of principal compared to what your account may end up within decades.
Yes, the government allows individuals over the age of 50 to save extra catch up contributions in your Individual Retirement Accounts and workplace 401(k) accounts, but by waiting you are only hurting yourself by not allowing for your money to take full advantage of the compounding effect. So start early in your working career by setting aside something on an automatic basis that will earn you modest returns for decades to come.
By the numbers
Let us examine some key ages that you could start saving $300 a month until you reach the age of 67, full retirement age for most Generation X and later generations. In this exercise, we will assume the monthly contribution will make a modest 7% return, which is an achievable goal, to say the least. For more information see the table below:
| Age | Contribution | Value at 67 | Invested | Profit |
| 25 | $ 300.00 | $918,439 | $ 151,200 | $767,239 |
| 35 | $ 300.00 | $431,023 | $ 115,200 | $315,823 |
| 45 | $ 300.00 | $188,487 | $ 79,200 | $109,287 |
| 55 | $ 300.00 | $67,802 | $ 43,200 | $24,602 |
As you can see, if you start at age 25 and set aside $300 a month until age 67 you will have saved $151,200 and have gains of $767,239 for a total of just under a million dollars at your full retirement ago. Now imagine you had an IRA and saved the maximum $6,000 a year for 42 years instead of $3,600. You would have a nice nest egg at age 67 in that case. In face about $1,384,000 to retire with.
The power of compounding
Now you can see that the power of compounding over the decades can be a very powerful tool in your goal to retire comfortably or work well into your golden years. By waiting you are depriving yourself of some serious gains that all you have to do to obtain is sit back and let your money work for you while you are living your everyday life.
Do not delay investing in your future and get started today by investing in yourself first and foremost. There will be some version of Social Security when you retire, but it may not be what people are collecting today. Plan for and prepare to fund your retirement and seek out the assistance of a Registered Financial Consultant to help you prepare for and plan for your retirement.
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