Accept it many of you are now spending on bills to pay for what
you have wanted for years and now you can finally afford it. The
last thing you will thing about is an investment for your
retirement. It is your choice whether to have fun with spending
money now but suffer when you get older or inverse! Take some
advice from those with a little more experience: Start investing
early in your career. Start from day one and you will never miss
that money you're setting aside. If your company has available a
401-K or a TSP program, jump on the band wagon immediately. If
you don't have these programs at your disposal, you can still
start an IRA and the concepts stated here are applicable as
well.
I can guarantee that it really does it make a difference when
you start contributing. It is important to invest in your
retirement account early in your career for two reasons. First,
if you're fortunate to receive matching contributions, you don't
want to miss out on those added contributions that are a
significant part of your retirement benefit. Second, the longer
contributions stay in your account, the more you stand to gain.
Your money makes money in the form of earnings, and those
earnings in turn make money, and so on. This is what is known as
the "miracle of compounding." As money grows in your account
over time, the proportion resulting from earnings will become
larger compared to the proportion resulting from contributions.
The size of your account balance is going to depend on how much
you (and your company if they match funds up to a certain
percentage) contribute to your account and how your account
grows as a result of earnings on your investments. To get an
idea of what your retirement account could be in the future,
look at the following projections.
Think this way. Assume that you are an employee eligible for
organizational contributions, that you are earning $28,000 each
year, and that you receive no future salary increases. You
choose to save 5 percent of basic pay each pay period; therefore
you receive total organizational contributions of 5 percent. The
growth projections below are for an assumed annual rate of
return of 7 percent on your investments.
After five years your account balance would be almost $17,000;
after ten years your balance would increase to $40,000; and
after contributing for twenty years, your account would have a
balance of $122,000. Clearly your balance would continue to
increase each year. If you contributed for forty years, which is
fathomable if you start a job at 23 and want to retire at age
63, your account balance would be $615,000. That's over half a
million dollars folks! Just from contributing 5% of your income
from the day you start work!
Can this number convince you to start saving money now?
About the author:
Dr. Drew Henry maintains a number of websites about banking,
including
Internet
Banking,
Investment
Bank, and
Investment
Banking
