Start Investing While You Are Still Young
You are young and you have just been hired in your first job which will, hopefully, pay you well. You are still so new at your career, that you are certainly not even thinking about retirement. But take some advice from those with a little more experience – start investing early in your career.
Start from day one and you will never miss the money you’re setting aside. And if your company offers a 401-k plan or a TSP program, join as soon as you can! If you don’t have these programs at your disposal, you can still start an IRA.
Starting to invest so early on in your career has definite advantages. First of all, if your company is offering matching contributions, their part can be a good chunk of your retirement. Also, the longer you keep the contributions in your account, the more interest you will earn. Your money creates more earnings, which also get added to the amount that will continue to be invested to create more and more earnings as time goes by. This advantage is sometimes called “the miracle of compounding. As the money in your account grows, you will get to a point in which the amount of earnings is higher than the amount in the account.
The size of your balance is going to depend on how much is contributed and on how much you earned on the contributions. If you are trying to figure out what your balance will be like when you retire, let’s make a few simple calculations.
Let’s say that you qualify for organizational contributions, and that you are earning $28,000 each year with no chances of an increase in salary. Let’s now assume that you choose to save 5% of your pay each pay period, and that your company matches that amount. The growth projections below are for an assumed annual rate of return of 7 percent on your investments.
If your balance in your account is $17,000 after five years, it would continue to increase to $40,000 after ten years, and up to $122,000 after twenty years. And of course, your balance would continue to increase as years go by. If you contributed for forty years, which is fathomable if you start a job at 23 and want to retire at age 63, your account balance would be $615,000. If you start contributing from your first paycheck, you would have more than half a million dollars sitting in your account.
Take a look at the numbers, and start investing today.
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