The Importance of Saving for Retirement
The importance of saving for retirement isn’t a lesson often taught in school. People tend to focus on more tangible goals to save for, like a first car or a house, and put off saving for retirement for as long as possible. What some people don’t realize is that the best time to start saving for your retirement is now!
There are two big reasons why it’s important to start saving for retirement as early as you can – making the most of compound interest and creating good saving habits.
Make the Most of Compound Interest
Depending on the compound interest of your retirement savings account, those who start saving earlier can reap greater benefits through their compound interest.
But let us show you a real example. Let’s say that you have a Roth IRA that earns compound interest of 7% in average annual returns, and you make the maximum contributions to that account every year ($6,000). After ten years, you will have $83,095. If you make the same contributions to a regular savings account with no interest, you would have $60,000. The longer you’re using compound interest to grow your retirement savings, the more earning potential you have.
Making Saving a Habit
If you decide to put off saving for retirement, getting into the habit of saving can be a challenge. But if you build saving for retirement into your budget from the moment you start earning money, the easier it will be to continue that habit for as long as you need.
Even if you’re in a position where you can’t make the maximum contributions to a 401(k) or an IRA, save every penny you can. Then, when you can, get serious about maxing out your yearly contributions and take advantage of any employer-based retirement accounts. This can add to what you’re already saving and serve you in the long run.
Make saving for retirement second nature and start making compound interest work for you. The earlier you start saving, the sooner your retirement fund can reach its full potential. If you don’t have a retirement fund and want to learn more about saving your way to retirement, contact the office.
This material was developed and prepared by a third party for use by your Registered Representative. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. The content is developed from sources believed to be providing accurate information.
The examples are for illustrative purposes only and the return is not indicative of any actual investment. Actual investment results may differ substantially.
Make Your Retirement Savings a Priority
April 14, 2022