When should you start saving for your retirement? The answer to that is…
So, why did I make an article that could be answered by just a single word? Well, I just want to emphasize the connection between time and your retirement, and the things you’ll be missing if you start too late.
You would often hear the phrase “start as early as possible” in the world of finance because time really plays a vital role in determining if you’ll end up poor or filthy rich the next day you wake up.
That could also be applied when you invest, so that you’ll have more time to build up your funds, even when you do your projects or assignments while you were in school and also when you’re planning for your retirement.
Time can’t be bought…
…Once you’ve lost it you can never get it back…
And the most common of all…
…Time is gold.
Those are just some of the phrases regarding time and how important it is to value it. Not getting the connection yet? Read more below.
Now, there’s another thing that time is somewhat related to, it’s called compound interest. You know the two words Mr. Einstein said to be the greatest mathematical discovery of all time.
Here’s a quote from one of the smartest men that ever lived regarding that matter:
“Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t, pays it…”
What do time and compound interest have to do with your retirement? Simple, they can help you have a great life (more money) after you retire, if you utilize them properly.
Here is an example that you could help you understand things easier.
Man X is 20 years old, while Man Y is 35 years old. They have different financial situation, Man X is just starting out to earning money on his own while Many Y has been earning a lot for years now. Both of them want to retire at the age of 50, so they started putting their money on different investments. Let’s just say that those investments could give them 12% return every year.
Man X plans to invest $1000 or 40,000 Philippine Pesos (Php) yearly while Man Y would invest $2500 or 100,000 Php annually. Man X wants to do this until he’s not yet 40 while Man Y is open to investing his hard-earned money until he decides to retire at age 50.
Now, who do you think will have the most money on the day they decide to retire, Man X or Man Y? Let’s look at the table below to determine it.
|Year||Man X||Man Y|
*The year Man Y stopped contributing
**The year Man X stopped contributing
Man Y invested $37,500 while Man X only invested $20,000. Man X even manages to more than double the amount of money that Man Y had, even if he didn’t put another thousand bucks after the 20th year.
Now, who do you think utilize his time and make use of compound interest more?
Man X, right? Because he was the one who has more time, that’s why he was able to maximize the benefits of compound interest. Therefore, I could conclude that it doesn’t really matter much whether you’re able to save more money, it may all come down to how long are you able to keep on saving (that’s why you need to start early as possible) and where you’ll be putting them (and why you need to invest wisely).
Do you agree? Are you already saving for your retirement or not?
Other interesting articles about retirement that you may like:
How Can I Save For Retirement – Frugal Rules
Could You Afford To Retire Early – Money Rebound
Loan Options For Retirees – Debt Roundup
Photo Courtesy of 401 (K) 2013