By Scott Sheldon, VP–Wealth Management,

The answer to this question is simple; as soon as you can.

The sooner you begin saving, the more time your money has to grow. Each year’s gains can generate their own gains the next year. This is an example of what the Wealth Management Team refers to as “the power of compounding.”

Here is an example of what a difference starting young can make. Say you start at age 25, and put aside $3,000 a year ($250/month) in a tax deferred retirement account for 10 years, and then you stop saving … completely … by the time you reach 65, your $30,000 investment will have grown to more than $472,000 (assuming an 8% annual return), even though you didn’t contribute a dime beyond the age of 35.

Now let’s say you put off saving until you turn 35, and then you save the same $3,000 a year for 30 years! By the time you reach 65, you will have set aside $90,000 of your own money, but it will grow to only about $367,000, assuming the same 8% annual return. That is a huge difference.

Example One: Save $3,000 for 10 years ($30,000) = $472,000
Example Two: Save $3,000 for 30 years ($90,000) = $367,000

Start End Annual Contribution Total Contribution Investment Return Final Value
20 65 $5,000 $225,000 8% $1,932,528
30 65 $11,215 $392,525 8% $1,932,532
40 65 $26,435 $660,875 8% $1,932,556

Please remember that it is never too late to start planning for retirement and if you have any questions about saving options, speak to a member of our Wealth Management Team.