There are three key components that can affect retirement funds: time, rate of return and your contributions. Can you guess which of the three is the most important?
Time, of course. Isn't it the one thing we always wish we had more of? More time for family and friends, more time for ourselves to partake in our favorite activities and hobbies, more time to complete a project for work that might advance our career.
But when it comes to retirement, time can be our enemy or our friend.
Understanding the power of time and compound interest shows the benefits of starting your retirement savings early. Compound interest means that the interest on your investments will earn interest as well, thus allowing you to build a bigger nest egg.
Albert Einstein once said, "Compounding interest is the most powerful force in the universe."
Who are we to argue with the man who gave us E=mc2
Let's look at an example of delaying retirement savings: Four individuals each desires to become a millionaire at age 65, but until now had no plan or knowledge of what would be needed to attain their goal.
*Assuming 6 percent
| Name: ||Age and amount they start with: || Monthly amount needed for $1,000,000 at age 65*|
| Kyle || 20/$0|| $363|
| Pat || 30/$10,000||$648
|Chris|| 40/$20,000|| $1319|
|Alex|| 50/$50,000|| $3026|
You have heard the saying "pay no or pay later.” Everything costs more down the road, but most especially your retirement! Time can be your friend or your worst enemy. A happy and secure retirement requires making time your friend.