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Planning for Retirement While You Are Still Young

savings fitnessThe following is excerpted from Savings Fitness: A Guide to Your Money and Your Financial Future from the US Department of Labor.

Retirement probably seems vague and far off at this stage of your life.

Besides, you have other things to buy right now. Yet there are some crucial reasons to start preparing now for retirement.

You’ll probably have to pay for more of your own retirement than earlier generations. The sooner you get started, the better.

You have one huge ally – time. Let’s say that you put $1,000 at the beginning of each year into an IRA from age 20 through age 30 (11 years) and then never put in another dime. The account earns 7 percent annually.

When you retire at age 65 you’ll have $168,514 in the account. A friend doesn’t start until age 30, but saves the same amount annually for 35 years straight. Despite putting in three times as much money, your friend’s account grows to only $147,913.

You can start small and grow. Even setting aside a small portion of your paycheck each month will pay off in big dollars later. Company retirement plans are the easiest way to save. If you’re not already in your employer’s plan, sign up.

You can afford to invest more aggressively. You have years to overcome the inevitable ups and downs of the stock market.

Developing the habit of saving for retirement is easier when you are young.

Read the rest of the publication here.