Start Investing as Early as You Can

The best time to plant a tree is twenty years ago. The second best time is now.

— African Proverb

When it comes to retirement, time really is money. While the amount you can expect to receive from Social Security will vary depending upon your income, the reality is that Social Security will replace only about 35-40% of your income. Even if you’ve saved a little, it might not be enough, since we are living longer than ever. If you’re in good health when you retire, there’s a good chance you’ll live well into your 80s and beyond. It’s possible that you will be retired for 30 years — almost as long as you worked!

The sooner you invest, the longer your money has to grow. Even a few extra years can make a big difference.

Consider two investors: Investor A, a 21-year-old, saves $100 a month for 9 years and then stops at age 30 for a total contribution of $10,800. Investor B saves $100 a month from age 30 to age 65 (35 years) for a total contribution of $42,000. Assuming an 8% rate of return, Investor A is able to retire at 65 with $231,047, while Investor B retires with $215,635.

Just think how much further ahead Investor A would be if he’d kept investing right up until retirement. Or been able to save more than $100 a month.