Common Money Myths - Myth # 6
Myth: There is No Reason to Save for Retirement if You're Under the Age of 40.
- 58% have heard this statement before
- 21% think it's true
Retirement may be years away from now but if you don’t start saving as early as you can for that time, you may not be able to afford to do it when you’re ready.
And, the biggest benefit associated with saving for retirement early is tied to the number of years where your savings will be earning interest/dividends. These funds will keep earning interest year-over-year as long as you don’t touch the money. The power of compound interest is amazing! Take a look at the example shown below:
Example: If you invested $1,000 per month for only ten years, starting at age 25 and left this money in your account until age 65, you would have a total of approximately $1.5 million available at retirement if your savings averaged a return of 7% per year!
Did you ever think that becoming a millionaire was even a realistic goal??? The average return on stock market investments is 10% per year so this example could very well reflect a true scenario.
And, if you set aside these funds through your employer’s 401(k) or another type of employer-sponsored retirement account where your investments are matched up to a certain percentage, you would be adding these “free money” contributions from your employer to your long-term savings. These additional funds will allow you to earn an even greater return over time compared to the funds that you’re setting aside on your own.
So, the best time to start saving for retirement is right now! If $1,000 per month is way too much, start small with $100 and work your way up to more each time that you get a bonus or receive an increase in pay.
You’ll get there before you know it!
Information about compounding interest was taken from - https://www.moneyunder30.com/power-of-compound-interest
Information about Common Money Myths was taken from a study recently conducted by Lending Tree –