Develop a retirement plan
Everyone understands the need to save for retirement. What few do understand is just how long it takes to really accumulate the amount of wealth you will need to retire early or to retire well. Everyone hears how important it is to invest in the right funds, and everyone is always talking about how much (or how little) they made on their investments. Unfortunately, no one is talking about how much you will really need in retirement, and how long it will take to save that amount. It's not always how much you manage to invest, but rather how early in life you started saving. The truth is that a small amount invested over a long period of time is the key to accumulating wealth. It simply cannot be done in a short period of time.
To demonstrate this point, consider the following two examples:
1) Jane invests $2000 a year from the time she is 23 until she is 30, for a total investment of $14000. Mary waits until she is 30 and then invests $2000 a year until she turns 67 for a total investment of $76000. They both earn 10% per year on their investments. How much more did Mary save by investing an extra $62000 (and waiting seven years)?
Millennials not saving enoughfor 45 years (from ages 20 to 65). At the end of this time, he had invested $13,500 and earned a total of $237,238 at 10% or a whopping $456,365 at 12%. While this might not be enough to retire well, it is a signficant amount of savings considering that he only invested $300 a year. How much could you save?
The real key to investing for retirement is to start as early as possible, and to save whatever you can afford. Everyone can find a way to save $1 per day on their expenses, and thus invest $30 per month. That extra $5 a month, or $2,700 total, would have yielded Jim an extra $91,003 in retirement.
Now that you agree that you must start right now, it is time to develop a retirement plan by following these steps.
Begin with Step One - Define Your Retirement Goal