It’s never too early to start planning for retirement. By coming up with a retirement savings plan and starting to save now, you’ll have the power of compound interest on your side.
Why Start Saving Today?
Compound interest! The basic principle of compound interest is this: the interest your money earns is added to the total amount and reinvested to earn even more interest in the future. A graph of compound interest earnings over time looks like a curve, with earnings increasing over time. The longer you can leave your money in a retirement account to earn interest, the more money you’ll eventually have to withdraw during retirement. Even if you can’t save a lot, saving a little lets you take advantage of compound interest over time.
It’s also important to remember that the investments inside most retirement accounts are not without risk. There is no guarantee that the money you save won’t lose value, and markets fluctuate in cycles of gain and loss. By starting to save early, you give your retirement account time to recover from a market valley. For investors who have time to wait before retiring, any potential gains from a good year far outweigh the risks posed by a bad year.
When it comes to retirement, starting to plan and save early is the best way to prepare. It can be tempting to put off saving, but establishing your retirement plan today lets you lay a solid foundation for your future years.