Start as Soon as You Can

Provided by Russell Investment Group

Your savings is your insurance for the future—and the longer you wait, the less money you could have working for you. Remember, starting early is best, but it's never too late to begin.

The following steps will help you use your savings to its maximum potential:

Start saving as soon as you can. The sooner you begin, the more your money will have the opportunity to grow. If you start your contributions early, you'll likely get a lot more retirement income than if you wait. In fact, if you regularly contribute to your account for 20 to 30 years, compounding on your contributions will provide much more money than you contribute. Consequently, you may be able to make relatively small contributions to your account when you start early because your assets have more opportunity to grow.

Save as much as you can. At the very least, try to contribute enough to receive the maximum match your company may provide. But, if you're able to contribute the maximum tax-free contribution allowed by the Internal Revenue Service you'll be better off in the long run.

Set goals. Think about the lifestyle you want in retirement and set goals to achieve it.

Stick with it. Investing a little every month uninterrupted for the long haul pays tremendous dividends in compound growth.

The chart below illustrates how starting early can pay off. In this hypothetical example, Joe and Jill started working for the same company in the same year, earning the same beginning salary of $25,000, with annual increases of 4%. Jill started a savings program immediately, putting away 5% of her salary annually with no interruptions, earning an annual return of 8%.

After 30 years, Jill would amass $230,150. Joe decided to wait to start a savings program. If he saved 11% of his salary annually for the last 10 years before retiring, earning an annual return of 8%, he would accumulate $114,832. Although contributing a larger amount per month, Joe would miss out on considerable returns created by the compounding process over the first 20 years.*