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Why You Should Start Saving for Retirement Now
Start Saving Now
I am only a few years out of college, but already saving for retirement. I recently attended a conference for work where they offered a retirement workshop. Their most important message was that you need to start saving for retirement as soon as possible.
It is difficult for a lot of us to find the motivation to make a retirement plan. If you are still relatively young, retirement seems a long way off.
Why worry about it now, if there is still plenty of time to make investments into your retirement savings?
What is an IRA?
An IRA is an Individual Retirement Account that provides a tax-free or tax-deferred way to save. There are many kinds of IRAs:
- Roth IRA
- Traditional IRA
- SEP IRA
- SIMPLE IRA
- Self-Directed IRA
IRAs have maximum amounts you can contribute each year. This amount depends on your age. Be sure to ask your financial advisor about the different types of IRAs, and which would be your best option.
You Should Plan Now
The earlier you start investing in your retirement, the less you will have to spend on your initial investment. Not only will you have to invest less, but you could end up saving more than if you start later and invest more. Let’s take a look at an IRA with 9% Interest.
As soon as you realize the huge difference it makes to start saving early, you will understand why it is so important to invest in your retirement plan now. Here’s the deal:
If you contribute $2000 to an IRA at 9% interest every year from the time you are 22 until you are 30, you will have invested an initial amount of $18,000. If you don’t invest anymore after that, you will have $579, 471 available by the age of 65.
On the other hand, though, if you start to make annual contributions of $2000 to the same IRA later, starting at the age of 31, and continuing until you are 65, you will invest $70,000. But, although you invest more, there will only be $470,249 available when you are 65.
If you can save more and invest less by starting to save younger, you should. At the same time, no matter what age you are, do not let this information get you down. It is never too late to save. But, you should start saving as soon as possible.
Take Steps to Secure Retirement
Remember that you don’t have to be a financial specialist or investing guru to make confident and wise choices. I suggest you do some research (reading books and articles), attend workshops (many cities offer free workshops for beginners), and talk to friends and family for advice and their personal experiences.