Time is On Your Side

You’re just beginning your career and retirement seems a million miles away. Yet, now is the absolute best time to get serious about retirement savings. Here’s why.

Reeling in the Years

Time is on your side, so use it wisely. The longer you save for anything, the greater the effect time can have on your earning potential. The combination of time and compounding interest packs a powerful punch. Here’s how much.

Input Your Numbers

Check out the Securities and Exchange Commission’s retirement calculator at www.investor.gov. There, you can input how much you’ll start with, how much you’ll save monthly and for how long, a projected interest rate and how often the money compounds.
For this hypothetical example, you invest $200 per month in an IRA or 401(k) plan for 40 years. You start with $0 and contribute $2,400 annually, or $96,000 over the 40 years. It earns 6% annually, compounded monthly. After 40 years, your money has multiplied to about $398,298 — a fourfold increase.

Double Down

Now, if you’re like most people, you probably think you can wait. Maybe you plan to cut the term to 20 years, but save double: $400 monthly or $4,800 annually. Will the same total contribution result in the same end number?
Not a chance. After 20 years and the same total contributions, with everything else being the same, the second strategy accumulates to only $184,816.

Time Really Matters

What happened? Time happened. It’s hard to think about saving for a faraway goal, especially if you’re paying off student loans and saving for more immediate goals like a house. But you can’t make up for lost time. Use time to your advantage. Once you’re retired, you’ll thank yourself for it.