Monday, January 23, 2012
When Should You Start Saving?
The answer to when to start is immediately. Due to the wonders of compounding interest the earlier a person saves the less he/she needs to save through their careers. For example, a hypothetical case would compare the savings for two people who start saving for retirement at different points in their lives. The first person is 22 and the the second is 35. The 22 year old saves $5000 per year until they are 58 years old. Assuming a modest 6% growth rate the 22 year old's account will grow to over $631,000. To reach the same account balance the 35 year old saver must put aside $12500 per year. The point of the example is to illustrate that the earlier you get started the easier it is to reach your retirement goals.
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I'm looking forward to your blogposts as am thinking of retiring from teaching next year!
ReplyDeleteThank you for the response and congratulations on having the ability to consider retirement at this point in your life. I am hopeful that I am able to talk others into saving so they are in the same position later in their lives.
DeleteGreat post. Couldn't agree more. I think some people underestimate just how much it will take to retire somewhat comfortably. The sooner your start planning, the better.
ReplyDeleteThanks for replying Josh I believe you probably have some of the same ideas as I do in this arena.
DeleteI like this topic choice. Being fairly new in my career, it is important to remember the benefits of starting to save now as opposed to later, This topic is vital for just about everyone.
ReplyDeleteChristine it is your age group that I am appealing to the most. An early start is the key to building wealth.
DeleteTrick (as you note) is to pay off credit card debt, put as much into retirement as possible, and pay off mortgage. I'm looking forward to a new chapter in my career... :)
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