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One of the best ways to make your money work hard is to start now.
Why is time of the essence? The sooner you begin saving – even small amounts – the better your chance of reaching your retirement goals. Consider the following example that shows how much waiting to invest can cost.
Investor A invested $1,000 per year for 10 years, beginning at age 30. Investor B also invests $1,000 per year, but began at age 45 and did so for 20 years. Even though Investor A saved less money – half as much as investor B, Investor A had more money – over 50% more – at the time of retirement, all because of starting earlier.
Although Investor A invested significantly less than Investor B, the extra years of compounding interest are what boosted Investor A’s bottom line. Investor B will now have to save considerably more to catch up. This is the cost of waiting, a cost that quickly adds up. It doesn’t matter what age you are – more time is on your side if you start saving for retirement today.
Use a savings calculator to see compounding in action and how little changes to your spending can have a big impact on how much you can save for retirement. Better yet, commit to increasing your ongoing contributions to your 401(k) or IRA.
Find out with My Retirement Plan, an online tool that makes it easy to see if you are on track. After you answer a few questions, My Retirement Plan will calculate your retirement savings goal and recommend personalized next steps.
This article has been prepared for informational purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. The accuracy and completeness of this information is not guaranteed and is subject to change. Since each investor’s situation is unique you need to review your specific investment objectives, risk tolerance and liquidity needs with your financial professional(s) before a suitable investment strategy can be selected. Also, since Wells Fargo Advisors does not provide tax or legal advice, investors need to consult with their own tax and legal advisors before taking any action that may have tax or legal consequences.
Retirement Professionals are registered representatives of Wells Fargo Advisors, LLC. Wells Fargo Advisors is the trade name used by two separate registered broker-dealers: Wells Fargo Advisors, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, non-bank affiliates of Wells Fargo & Company. Discussions with Retirement Professionals may lead to a referral to Wells Fargo Advisors’ affiliates including Wells Fargo Bank, N.A. Wells Fargo Advisors and its associates may receive a financial or other benefit for this referral. Wells Fargo Bank, N.A. is a banking affiliate of Wells Fargo & Company.