When to Start Investing for Retirement

It’s simply a fact: most people wait way too long to start investing for retirement. It’s not that hard to see why either… people look at it, and figure they won’t retire for at least 30-40 years, and so they figure that they have plenty of time to save for retirement. Why start now when you could spend that money for something nice? However, that type of attitude can lead you into a lot of problems down the road when you are desperately trying to catch up and save for retirement.

So, when should you start saving and investing for retirement? Well, right now would be good. No matter how old you are, the sooner you start, the better off you will be. Compound interest is the biggest key to saving for retirement, and the sooner you start, the better you can take advantage of that.

“The most powerful force in the universe is compound interest.” – Albert Einstein

Basically, the sooner you start, the longer the money that you do invest will have to grow, and the longer the money has to grow, the more compound interest kicks in, and the more money that you will eventually have. If you want to be able to comfortably retire, you have to allow compound interest to be your guide in saving for retirement.

Look at this way… let’s say that you save $1000 and put it away for retirement right away. Let’s say that (to make things simple), that $1000 earns 10% every single year… here is how much you would have after a certain amount of year:

Start – $1000
Year 5 – $1464
Year 10 – $2357
Year 20 – $6115
Year 30 – $15,863
Year 40 – $41,144

So you can see the great power of compound interest. In the first 20 years of that investment, you would earn about $5000, which is nice but its not going to fund retirement. However, during the next 20 years the money gains about $35,000. This is just for a one-time $1000 investment, but hopefully you’re saving more than that for retirement, which makes the growth even more pronounced. If you don’t take full advantage of compound interest over time, it will be almost impossible to adequately fund for retirement. You will have to invest more and more money to get to a place where you can retire. It’s a much better plan to invest a smaller amount of money over a longer amount of time.

So, what’s the best time to save for retirement? Right now! That is how you can make sure that you won’t have to worry about money, but instead worry about how you are going to spend your golden years.