855-729-8178

855-729-8178

So You Are Too Young To Save For Retirement?

So You Are Too Young To Save For Retirement?

One of the most humorous objections I hear from the younger generation, twenty somethings, is that they are too young to worry about saving for retirement. That’s like saying “I’m too fat to go on a diet”, right… Youth is the absolute biggest advantage of saving for retirement. When time is on your side the amounts can be very small to take advantage of time and compounding. Let’s look at an example of compounding interest over decades.

Let’s take an example of two investors at two different ages. “Larry” is a 20 year old investor of $100 per month or $1,200 per year and “Jerry” is a 30 year old investor of $100 per month or $1,200 per year. For example purposes using the Rule of 72 let’s calculate our long term interest rate at 7.2%. This means both men’s money will double every 10 years which is fairly conservative using the Rule of 72. Both men will contribute this set amount every year until their retirement at age 70. “Jerry” will contribute $48,000 over his 40 years and his investment will grow to just under $290,000. However, “Larry” contributed $60,000 and his investment grew to just under$599,000. “Larry’s” advantage of investing 10 years earlier than “Jerry” allows his money to double one more time and he was able to add an additional $12,000. So “Larry” added 25% more money than “Jerry” but his investment grew to 207% more than “Jerry’s” investment. There is no way to make up for the lost time of compounding.

If you are older than 20 years old, you have already wasted time. You must start today setting aside retirement money. First, we must live within our means. Pay off our debts; stop borrowing money for every little thing. Second, we must become habitual savers. Most Americans think that it takes large sums of money to start a retirement fund. This is a myth fabricated by Wall Street. It just simply takes a system of discipline to pay you first. Albert Einstein was quoted as stating “the most powerful force in the universe is compounding interest”. By systematically saving just a few dollars per day and receiving a decent interest rate of return, one can have a decent if not comfortable retirement. To save $100 per month or $25 per week or $3.57 per day or about .60 cents per hour if you work on clock wages takes discipline. Look really hard at where you spend your money every day. Is it Starbucks coffee, Red Bull, pack of cigarettes, 6 pack of beer, eating lunch out? You don’t have to stop these habits but you have to change the way you spend money on them. Make your coffee at home, bring a bag lunch, cut back on smoking, use diet and exercise instead of caffeine drinks. Little changes in behavior can free up that extra $3.57 per day to save for your retirement.

So, the next time you think you are too young to think about retirement, realize it is too late to think about it, just start saving for it. Good luck!

For more FREE tips download a FREE copy of the new eBook The Minimum Wage Millionaire .

“Money is not really important, but it is high upon the list with oxygen.”—Zig Ziglar

Image by Stuart Miles at www.freedigitalphotos.net

yourfriend4life.com

Tim Wilhoit is owner/principal of Your Friend 4 Life Insurance Agency in Nashville, TN. He is a family man, father of 3, entrepreneur, insurance agent, life insurance broker, salesman, sales trainer, recruiter, public speaker, blogger and team leader with over 27 years of experience in sales and marketing in the insurance and beverage industries.

9 Responses to So You Are Too Young To Save For Retirement?

Leave a Reply