Planning for your retirement may include plenty of free time to pursue your favorite hobbies, travel the country, or spend lots of time with your grandchildren. People who have successfully invested for retirement, especially those who started early, maybe comfortable in retirement, but those who started retirement planning too late may end up scrimping through their retirement years or worried they will run out of money.
If you haven’t established a retirement plan yet, the best time to reach out for financial planning & advisory services is today, no matter how far off those Golden Years seem. In this post, we will discuss the many benefits of investing early for retirement and how you can set yourself up for the Golden Years you have always dreamed of.
What “Starting Early” Means For Retirement Investing
Early investing for retirement means starting as early as possible, ideally in your twenties (or even earlier). You may have just entered the workforce and started your career a few years ago, and the retirement age of 65 seems eons away. But, when you start early, you’ll have several advantages over people who didn’t start retirement planning until their 40s.
When you seek out retirement planning services early, thanks to the benefits of compound interest, your retirement accounts have greater growth potential. You’ll have to invest far less when you start saving at 25 because the interest your retirement account accrues compounds.
A certified financial planner can help you start retirement savings, reduce your taxable income through retirement contributions, and reach your retirement savings goal comfortably.
How Compound Interest Works For You
In a retirement account with compound interest, time is on your side. With compound interest, the money you earn on your investments is then invested back into that retirement account, which grows and grows. If you invest just $6,000 at age 25, that money will grow into $240,000 by age 62, assuming a return rate of 10.5%.
If you wanted to have $240,000 at age 62 and started investing at 35, you would need to have an initial investment outlay of $16,250, more than two and a half times the principal!
Investing a Little Money Now Leads to More Money Later On
Start your retirement investing with a plan. Determine what you want your retirement years to look like, including traveling or moving to a more desirable location. You may wish to work with an accounting consultant to determine how much your goals will cost. But, it’s always better to invest a little money early on in your life than to invest a lot if you wait til later.
The longer you wait to start retirement investing, the more work it will take to reach your savings goals. You may not have the flexibility for investing that you would if you started at 35 or even 30. High-risk investments can sometimes have incredibly high rewards, putting you in a much better place for retirement or a major purchase. However, later in life, you may be unable to weather a high-risk investment that flops and not have enough working years left to make up that loss.
Getting Started With Early Retirement Investing
Setting your goals for the future and estimating how much they will cost is your first step to planning for retirement. You may plan on retiring at age 60, for example, while you’re still relatively young enough to travel. This may mean a more aggressive investment strategy.
TPI Group can help you estimate how your cost of living may increase over time and what your savings goals should be.