Retirement Savings

Time Is Your Greatest Ally

December 11, 2018
Saving early can help position you to achieve your financial goals.

Key Points

  • The earlier you start saving, the more time your money has to benefit from any compounding.
  • Individuals who invest the same amount over different periods of time will have vastly different outcomes.
  • In the simplest terms, time can help an investor's savings dollars work harder.

Among all of the factors that influence your retirement savings, you often have the most control over how much you invest and when you start investing. With consistency, even modest investments can grow significantly over time. Consider the case of four individuals who start saving at different ages:

  • Mike at age 22
  • Judy at age 32
  • Charles at age 42
  • Amy at age 52

Let’s say each of them sets aside the same total amount of $250,000 in tax-deferred accounts over the course of their careers. But because of the difference in when they started saving, each of these investors will achieve a very different outcome.

Make the most of time

The potential for greater compounding over time means that Mike could contribute only a third of what Amy does every month and yet end up with nearly four times as much in savings by age 67. In this way, time is an ally in helping an investor’s savings dollars work harder.

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