Don’t Underestimate the Impact of Saving While You’re Young
Another great guest post here by Yolander Prinzel to compliment one of our videos about a student who has gone through our wealth building and financial coaching process. What a great writer she is! I really appreciate her work as I continue to stay focused on my book deadline…
Enter Yolander Prinzel:
No matter how much you plan, your life will not follow a direct and predictable route. You may encounter a lot of difficulties regardless of how “in control” of your life you think you are. You could lose a job, accrue debt, make a bad business or financial decision, outlive your retirement savings-the possibilities are endless.
That is just one of the reasons why starting to save for retirement while you are young is important-because there may be times in your financial future when you aren’t able to set aside as much money to save for retirement as you want, or need. If you start saving while you are young, those initial deposits will continue to grow while you grapple with your current-day finances.
And even if you are able to maintain consistent retirement plan contributions over your entire working life starting young gives you that much more time for your savings to grow and compound-something that it can’t do if it’s sitting in your pockets waiting to be spent. And the best part is, it doesn’t matter how little you can afford to save for retirement while you’re young, it is still going to make a gigantic difference.
Don’t believe me? Well let’s say you only have $21 per month to save for retirement. For 10 years as you struggle through grad school and then climb the ladder to professional success all you can afford to save is $21 a month in your IRA. At the end of that decade, assuming your portfolio gains an average of 7%, you will have $3,635. That’s $2,520 in deposits over the years and $1,115 in interest. But wait-there’s more. Regardless of whether or not you are able to contribute even more to your IRA after that 10 year period, you still have that $3,635 growing until retirement. Let’s say you retire 20 years later. Your $3,635 (continuing to average a 7% return) will now be worth $14,681. That’s a gain of $12,161 on your principal.
The perfect retirement savings has many components-and saving early is one of the most important and significant.
Yolander Prinzel (www.YolanderPrinzel.com) is a financial writer as well as a series 7, 66 and 2-15 licensed representative. During her decade of financial industry experience she has been an insurance agency director of marketing and director of operations, a life insurance underwriter, and a trading service specialist for Raymond James Financial Services. She was a featured speaker at the 2006 Hartford National Sales Conference and the 2006 Brookstreet Securities Annual Conference.
